not-for-profit governance principles

Not-for-Profit Governance PrinciplesSecond Edition, January 2019

2 NOT-FOR-PROFIT GOVERNANCE PRINCIPLES

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© 2018 Australian Institute of Company Directors

WE’RE FEELING SOCIAL, CARE TO JOIN US?

NOT-FOR-PROFIT GOVERNANCE PRINCIPLES 3

The not-for-profit sector makes an enormous contribution to Australia’s social and economic welfare. Not-for-profits protect our environment, educate our students, enable us to practice our faith, celebrate our cultural heritage, and protect the most vulnerable in our community. Over a history of more than 200 years, not-for-profits have been a powerful and positive influence on the development of Australian society.

The Australian Institute of Company Directors (AICD) is committed to supporting not-for-profits and their boards to achieve good governance. The Not-for-profit Governance Principles (Principles) are demonstrative of this commitment.

The first version of the Principles was released in 2013. Their aim was to provide a practical resource to help not-for-profit boards and directors to achieve good governance.

Since that time, the sector has experienced significant regulatory reform and disruption. In recent years, great attention has been paid to the governance of not-for-profits and its role in maintaining the community’s trust and in preventing misconduct, particularly against vulnerable people. It is fair to say that good governance has never been more important for the not-for-profit sector.

The Principles have been revised and developed considerably in this edition. They now include more detailed descriptions of governance and are accompanied by additional guidance. The aim is to help users of the Principles understand them better and apply them in practice. Of course, it will be a matter for each not-for-profit to carefully consider how best to apply the Principles to their own circumstances.

In developing this edition of the Principles, extensive consultation has been undertaken with directors, executives, policymakers and other stakeholders to ensure that it reflects the wisdom and insight of the broader not-for-profit sector. On behalf of the AICD, I express our gratitude to the many people who have contributed to the development of this resource which, we hope, will help not-for-profits in their important work.

I am delighted to present these Principles, and in doing so to reinforce the commitment of the AICD to standing with the not-for-profit sector as part of our goal to strengthen Australian society through world class governance.

Angus Armour faicd

Managing Director & CEO Australian Institute of Company Directors

Foreword


Snapshot of the Principles

Principle 1

Purpose and strategy

The organisation has a clear purpose and a strategy which aligns its activities to its purpose

1.1 The organisation’s purpose is clear, recorded in its governing documents and understood by the board

1.2 The board approves a strategy to carry out the organisation’s purpose

1.3 Decisions by the board further the organisation’s purpose and strategy

1.4 The board regularly devotes time to consider strategy

1.5 The board periodically reviews the purpose and strategy

Principle 2

Roles and responsibilities

There is clarity about the roles, responsibilities and relationships of the board

2.1 Directors’ roles are clear and understood by the board

2.2 Directors understand and meet their duties under the law

2.3 Directors meet any eligibility requirements relevant to their position

2.4 Delegations of the board’s authority are recorded and periodically reviewed

2.5 The role of the board is clearly delineated from the role of management

Principle 3

Board composition

The board’s structure and composition enable it to fulfil its role effectively

3.1 Directors are appointed based on merit, through a transparent process, and in alignment with the purpose and strategy

3.2 Tenure of directors is limited to encourage renewal and staggered to retain corporate knowledge

3.3 The board reflects a mix of personal attributes which enable it to fulfil its role effectively

3.4 The board assesses and records its members’ skills and experience, and this is disclosed to stakeholders

3.5 The board undertakes succession planning to address current and future skills needs in alignment with the purpose and the strategy


Principle 4

Board effectiveness

The board is run effectively and its performance is periodically evaluated

4.1 Board meetings are chaired effectively and provide opportunity for all directors to contribute

4.2 Directors seek and are provided with the information they need to fulfil their responsibilities

4.3 Directors are appropriately inducted and undertake ongoing education to fulfil their responsibilities

4.4 The board’s performance, as well as the performance of its chair and other directors, is periodically evaluated

4.5 The relationship between the board and management is effective

Principle 5

Risk management

Board decision making is informed by an understanding of risk and how it is managed

5.1 The board oversees a risk management framework that aligns to the purpose and strategy

5.2 Directors seek and are provided with information about risk and how it is managed

5.3 The board periodically reviews the risk management framework

Principle 6

Performance

The organisation uses its resources appropriately and evaluates its performance

6.1 The board oversees appropriate use of the organisation’s resources

6.2 The board approves an annual budget for the organisation

6.3 The board receives and considers measures which evaluate performance against the strategy

6.4 The board oversees the performance of the CEO

6.5 The board monitors the solvency of the organisation


Principle 7Accountability and transparency

The board demonstrates accountability by providing information to stakeholders about the organisation and its performance

7.1 The organisation’s governing documents and policies relevant to its governance are available to stakeholders

7.2 The board oversees appropriate reporting to stakeholders about the organisation’s performance and financial position

7.3 Transactions between related parties, if any, are disclosed to stakeholders

7.4 Directors’ remuneration and other benefits, if any, are disclosed to stakeholders

7.5 Members have the opportunity to ask questions about how the organisation is run and to hold the board to account for their decisions

Principle 8

Stakeholder engagement

There is meaningful engagement of stakeholders and their interests are understood and considered by the board

8.1 The board understands who the organisation’s stakeholders are, their needs and their expectations

8.2 The board oversees a framework for the meaningful engagement of stakeholders

8.3 Stakeholders are considered in relevant board decision making

8.4 There is a process for gathering and responding to complaints and feedback from stakeholders

8.5 The board oversees a framework for how the organisation works with and protects vulnerable people

Principle 9

Conduct and compliance

The expectations of behaviour for the people involved in the organisation are clear and understood

9.1 The board articulates its expectations of conduct, and the consequences for misconduct, for the people involved with the organisation

9.2 The board oversees compliance with relevant laws, regulations and internal policies

9.3 Conflicts of interest are identified, disclosed and managed

9.4 There is a process for investigating misconduct and relevant instances are brought to the attention of the board


Principle 10

Culture

The board models and works to instil a culture that supports the organisation’s purpose and strategy

10.1 The board defines and models a desired culture that aligns to the purpose and strategy

10.2 The board oversees a strategy to develop and maintain the desired culture

10.3 The board oversees mechanisms to monitor and evaluate organisational culture

10.4 The organisation’s values are clear, periodically reviewed and communicated to stakeholders

10.5 The board oversees a framework for the reward and recognition of workers


INTRODUCTION 10

ABOUT THE PRINCIPLES 12

USING AND REPORTING ON THE PRINCIPLES 14

CONTEXT FOR THE PRINCIPLES 15

PRINCIPLE 1: PURPOSE AND STRATEGY 21

Questions for directors 26 Case Studies 27

PRINCIPLE 2: ROLES AND RESPONSIBILITIES 29


PRINCIPLE 3: BOARD COMPOSITION 39


PRINCIPLE 4: BOARD EFFECTIVENESS 47


PRINCIPLE 5: RISK MANAGEMENT 55

Questions for directors 60 Case Studies 6 1

Contents


PRINCIPLE 6: PERFORMANCE 63

Questions for directors 70 Case Studies 7 1

PRINCIPLE 7: ACCOUNTABILITY AND TRANSPARENCY 73


PRINCIPLE 8: STAKEHOLDER ENGAGEMENT 81


PRINCIPLE 9: CONDUCT AND COMPLIANCE 87


PRINCIPLE 10: CULTURE 95 Questions for directors 98 Case Studies 99

GLOSSARY 100

ACKNOWLEDGEMENTS 102


Introduction

The Not-for-profit Governance Principles (Principles) have been developed by the Australian Institute of Company Directors (AICD) as part of its commitment to promote good governance in the not-for-profit (NFP) sector.

The Principles are a practical framework to help NFPs understand and achieve good governance.

The original version of the Principles was published in 2013. This revised edition reflects the changes in the sector since that time, including the increased expectations of governance in NFP organisations. It also includes more detailed descriptions of good governance practices as well as additional guidance to support

users to understand and apply the Principles.

Who this document is for

This document is for the people who are involved in

the governance of NFPs. It is written for an audience of

directors and executives, but other people involved in the

governance of NFPs such as managers, staff and members

may also find this document useful.

!

In this document the term ‘director’ refers to the people who make up an organisation’s board. In some organisations these people may be known as the board members, committee members, trustees, councillors, governors or by another name

What is governance?

Governance refers to the systems that direct and control –

or govern – an organisation.

Governance is about relationships. It concerns the

relationships of the people involved with an organisation,

both between each other and with the organisation itself,

and the ways that the expectations of these relationships

are understood and met. Governance enables authority to

be exercised appropriately and for the people who exercise

it to be held to account.

The Hon. Justice Neville Owen, who headed the Royal

Commission into HIH Insurance, defined governance as:

“…the framework of rules, relationships, systems and

processes within and by which authority is exercised and

controlled in corporations. It encompasses the mechanisms by

which companies, and those in control, are held to account.”

There is no one-size-fits-all approach to governance.

Every organisation must consider its own circumstances

in determining how best to develop a fit-for-purpose

approach to governance. This should include

consideration of factors such as an organisation’s size,

purpose, and structure.

The way organisations are governed (and the resources

available to support this) will differ between organisations.

Some organisations will have the resources to assist them

in developing a sophisticated governance framework

whereas smaller ones with scant resources may struggle

to do this, instead relying on more informal approaches to

help them achieve good governance.

That is not to say that good governance is more easily

achieved by larger organisations.

All organisations can achieve good governance.

Consultation on the Principles

The AICD undertook extensive consultation throughout

2018 on the development of the Principles to draw on the

experience and insight of directors, executives,

their advisers and the broader NFP sector.

Consultation on the Principles included three components:

1. Release of a public consultation paper including draft

principles and supporting practices for comment;

2. Focus groups with NFP directors; and

3. Consultation with the AICD’s NFP Chairs’ Forum,

policy committees and division councils.


The AICD also established a steering committee to guide

the development of the Principles.

Throughout the consultation process, strong feedback

emerged that expectations of governance in the NFP

sector have increased since the original edition of the

Principles was published in 2013. Many NFP directors

were seeking additional guidance on what good

governance ‘looks like’ and welcomed a resource such as

the Principles being expanded to help NFPs understand,

apply and meet these expectations.

Consultation participants also observed the importance

of understanding and accommodating the diversity of the

NFP sector, recognising the variation in the size, resources

and maturity of the organisations within it.

Feedback endorsed the development of a more detailed

and practical document, informed by the experience of the

NFP sector, which provides a framework to assist in the

achievement of good governance. However, participants

also expressed that it was important that any such resource

be voluntary in application. This feedback is consistent

with the AICD’s objectives in developing this document.

This overview of the regulatory environment is current as

at the date of publication, and NFPs should keep abreast

of the latest developments relevant to their organisation.

The Principles will be subject to periodic review to

ensure their ongoing currency and relevance. The AICD

is interested in hearing from users of the Principles about

their experiences and invites feedback by email to

[email protected].

ADDITIONAL RESOURCES

• Online versions of the Principles are available at

companydirectors.com.au/nfpprinciples along

with a suite of relevant tools and content to assist

users

• Further NFP resources including director tools

are available here: companydirectors.com.au/

resources/not-for-profit-resources

"Good governance exists where an organisation has systems and processes in place that are appropriate to its circumstances, and which enable the organisation to pursue its purpose effectively and meet its obligations under the law.”

http://aicd.companydirectors.com.au/nfpprinciples

http://aicd.companydirectors.com.au/resources/not-for-profit-resources



About the Principles

The Principles consist of three components:10 individual

principles with supporting practices and guidance on each.

The principles

The cornerstone of the Principles is the 10 ‘principles’.

Each of the 10 principles is explained by a heading and a

high-level statement about an aspect of good governance

(see Figure 1). Together, these principles provide a

framework to understand governance in an NFP context.

!The word ‘Principles’ with a capital ‘P’ is used to refer to this document. The word ‘principles’ with a lower case ‘p’ is used to refer to the 10 individual principles set out in it.

This document is structured around the 10 principles.

The ordering of the principles aims to assist users

to understand and apply them in practice and is not

intended to indicate priority. It is important to note

that the principles are interrelated and there is overlap

between them.

Supporting practices

Each of the 10 principles includes several ‘supporting

practices’ which describe activities or behaviours of

organisations that are likely to be meeting the principles

(see Figure 1).

The supporting practices are drafted in an outcomes-

based way. They describe the outcome the supporting

practice aims to achieve but do not prescribe how this is

to be accomplished.

This structure is intended to provide flexibility for users

to determine how to interpret and apply the supporting

practices within their own circumstances. Two different

organisations may demonstrate the supporting practices

in very different ways.

Figure 1: Example principle and supporting practices

Principle 1 Purpose and strategy

The organisation has a clear purpose and a strategy that aligns its activities to its purpose

Supporting Practices






For example, there are several ways an organisation could

demonstrate that it is meeting Supporting Practice 1.4.

The board might hold an annual strategy day, consider

strategy at one meeting per quarter, or make strategy a

permanent agenda item. Each of these ways are equally

valid, but how effective they are in contributing to

good governance will depend on how well they suit the

circumstances of the organisation.

Guidance

Each of the principles and supporting practices is

supported by guidance that aims to help users better

understand their practical application.

The guidance includes two case studies that demonstrate

how the principles and supporting practices can be

applied. The case studies are based on two fictional

organisations that are very different in terms of their

purpose, activities, size and complexity. They are not

reflective of any particular real organisation.

In the case studies both organisations are meeting the

Principles in different ways which demonstrates that there

is no one-size-fits-all approach to governance.


HelpfulCare

Helpful Care Services Limited was founded in 1916 in Melbourne’s inner east to provide benevolent relief to children experiencing or at risk of homelessness. The organisation is a company limited by guarantee and is registered as a charity. Trading under the name of ‘HelpfulCare’, the organisation has grown to be a large and successful social service provider operating in all Australian states and territories.

Today HelpfulCare provides services to a range of clients including families, older Australians and people living with a disability. Among other things, HelpfulCare provides crisis accommodation, drug and alcohol counselling, out-of-home care and disability support services.

HelpfulCare has an annual operating revenue of approximately $150 million, most of which comes from government funding either directly through grant funding or indirectly under the National Disability Insurance Scheme. It also generates some revenue through philanthropic donations, investments and through several fee-for-service activities.

Approximately 650 people work for HelpfulCare and their work is supported by over 900 volunteers nationally. The board of HelpfulCare comprises six non-executive independent directors. Directors are appointed by the board and are the organisation’s only members.

The Friendlies

The Friendly Community Group Inc. was established by a small group of friends in 2005 with the purpose of coordinating a volunteer effort to clean up a local creek in Kalgoorlie. After being profiled by the local paper the group grew, picking up some other projects including a breakfast club, an annual tennis tournament and a community gardening service.

Known affectionately in their community as ‘the Friendlies’, the group now comprises about 70 volunteers. In 2011, the Friendlies decided to amalgamate as an association. Anyone is welcome to become a member of the Friendlies and today the group has about 120 members, most of whom are current and former volunteers.

They have a small operating budget which fluctuates each year depending on the projects they are working on, which is generally about $50,000. Most of their project expenses such as food and building materials are donated by local business, but they also receive small grants from local government and benefit from community philanthropy.

The Friendlies board is made up of nine directors who are elected by the membership at their annual general meeting. The group has one part-time employee, but the majority of its operations are carried out by volunteers.


Using and reporting on the Principles

The Principles are a practical and voluntary framework

to help NFPs understand and achieve good governance.

Users will need to consider the Principles in their own

circumstances and determine how best to use and

understand them.

Not all aspects of governance that will be relevant to

every organisation are considered in the Principles. For

example, some NFPs that are trusts may not find Principle

3: Board composition useful because the way that trustees

are appointed may not enable them to demonstrate the

supporting practices.

Some organisations may also have additional governance

requirements imposed by funding agreements or laws

that apply to the organisation which go beyond what is

included in the Principles.

Organisations that do not use or meet the Principles

exactly may not necessarily be poorly governed, nor will

those who use the Principles necessarily be well governed.

Using the Principles

The AICD encourages NFPs to use the Principles to help

them to achieve good governance. Using and complying

with the Principles is voluntary.

The Principles are not intended to be a stepping stone

to regulation. Good governance cannot be achieved

through a one-size-fits-all approach, and its features will

differ between organisations based on their individual

characteristics. The Principles also go beyond what may be

considered a minimum standard of governance, and aim

to encourage organisations to strive for and achieve good

governance.

As such, the Principles are not suitable to be implemented

as law or regulation. They should also not be read as a

substitute for, or detracting from existing governance

regulations, such as the Australian Charities and Not-for-

Profits Commission (ACNC) governance standards.

It is not the role of the AICD to accept complaints about

organisations that do not comply with the Principles.

Reporting against the Principles

The AICD encourages users of the Principles to conduct

regular assessments of their performance against them

and to report about the outcome of this assessment to

stakeholders. It is a good idea to do this on an annual basis.

Reporting on performance against the Principles provides

a framework for organisations to communicate with

stakeholders about their governance.

NFPs that report against them will need to consider

what evidence they have that demonstrates they are

achieving the Principles or the supporting practices. This

exercise alone is a useful practice for boards as reporting

its outcome to stakeholders can help increase trust,

transparency and accountability.

The AICD encourages users to adopt an ‘if not, why not’

approach to reporting on the Principles. This means that

where an organisation is not meeting any part of the

Principles, they explain why this is so. For example an

NFP may take the view that adherence to a principle or

supporting practice may not be necessary or appropriate

for their organisation. They should explain the rationale for

this position.

There are a number of ways that an NFP could

communicate to stakeholders about the Principles. For

example, an NFP might produce a corporate governance

statement which incorporates commentary on all aspects of

the Principles. Some organisations may choose to list either

the principles, the supporting practices or a combination of

the two, and provide evidence that demonstrates how they

are being achieved.


Context for the Principles

Understanding the environment in which NFPs exist is

critical to understanding what good governance means for

this important sector. NFPs operate in a diverse and often

challenging operational context.

The NFP sector has undergone significant change since

the release of the first edition of the Principles in 2013.

Regulatory reform, disruption to funding patterns and an

increasingly complex operational setting have reshaped the

sector in many ways. This revised edition is intended to be

reflective of these changes.

What is a not-for-profit?

An NFP is an organisation that does not operate for the

profit or gain of its individual members, whether these

gains would have been direct or indirect. This applies both

while the organisation is operating and when it winds up.

Being an NFP does not mean that you cannot make a profit

(sometimes called a ‘surplus’). NFPs can make a profit

provided it is used to further its purpose.

What is a charity?

A charity is an NFP that only has charitable purposes. All

charities must be NFPs, but not all NFPs are charities.

Charitable purposes are defined under the law, most often

under the Charities Act 2013, however state and territory

legislation and the general law also may use different

definitions of charitable purpose.

Charities registered with the ACNC must have only

charitable purposes that are for the public benefit as

defined in the Charities Act 2013. These organisations are

referred to as ‘registered charities’.

Background to the not-for-profit sector

The NFP sector is large and diverse, and has been a

critical component of Australia’s social and economic

infrastructure for over 200 years.

According to the Australian Charities Report 2016, charities

alone (which represent only a fraction of the broader

NFP sector) employ 1.3 million people (10 per cent of the

Australian workforce), engage 2.9 million volunteers and

have a combined revenue of more than $142 billion. Every

year, Australians give as much as $10.5 billion in donations

and bequests to this important sector.

The great majority of NFPs in Australia are very small and

are not separately incorporated. Of the roughly 56,000

that are registered charities, 67 per cent have less than

$250,000 in annual revenue and 40 per cent have less than

$50,000. Half of all these charities operate with no paid

staff at all and rely entirely on volunteers.

The AICD’s 2018 NFP Governance and Performance Study

(NFP Governance Study) has found that the great majority

of NFP directors are unpaid, with only 16 per cent of

directors receiving remuneration.

Diversity of the NFP sector

NFPs take many different shapes and sizes, and operate

with many different purposes. NFPs may be involved in

activities such as:

There are also a number of different formal and informal

structures that NFPs may take, including:

• Companies limited by guarantee;

• Incorporated associations;

• Indigenous corporations;

• Trusts

• Unincorporated associations;

• Cooperatives; and

• Statutory entities (organisations established by Acts of

Parliament).

• Health and aged care;

• Social services;

• Education and research;

• Environmental protection;

• Arts and culture;

• Religion; and

• Sports.


There are many other factors that contribute to the

diversity of the sector, such as, the size and maturity of

the organisations within it, as well as the people they

work with, whether they have paid staff or not, and the

locations in which they operate.

NFPs will be subject to different laws, regulations and

standards based on factors such as:

• Their activities, such as being involved in child care or

aged care;

• Legal structure;

• Legal status (such as registration as a charity or tax

endorsements); or

• The locations in which they operate.

!The legal duties of directors are generally the same or very similar irrespective of the formal or informal structure the organisation takes.

Regulatory reform

Over the past 10 years, the NFP sector has undergone

substantial regulatory reform.

The ACNC was established on 3 December 2012 after

almost two decades of campaigning from the sector for the

establishment of a specialist, independent regulator

of charities.

The introduction of the ACNC was a seismic shift in the

regulation of charities. Financial and operational reporting

for registered charities is now available to the public

through the ACNC Register (acnc.gov.au/findacharity).

Some state and territory governments have taken steps to

reduce red tape by introducing harmonised reporting with

the ACNC, and it is likely that this trend will continue over

the next few years.

Reform has also been undertaken at the state and

territory level, including to the regulation of incorporated

associations and cooperatives.

ACNC governance standards

Registered charities (except a limited class of charities called

‘basic religious charities’) must meet certain ‘governance

standards’ to be and remain registered with the ACNC.

The governance standards are a set of five core, minimum

standards of governance. Broadly, they require charities to

pursue a charitable purpose, operate lawfully, and be run in an

accountable and responsible way. They are intended to help

charities maintain the trust and confidence of the community.

THE GOVERNANCE STANDARDS 1

1: Purposes and not-for-profit nature

Charities must be not-for-profit and work towards

their charitable purpose. They must be able to

demonstrate this and provide information about their

purposes to the public.

2: Accountability to members

Charities that have members must take reasonable

steps to be accountable to their members and provide

them with adequate opportunity to raise concerns

about how the charity is governed.

3: Compliance with Australian law

Charities must not commit a serious offence (such as

fraud) under any Australian law or breach a law that

may result in a penalty of 60 penalty units or more.

4: Suitability of responsible persons

Charities must take reasonable steps to be satisfied

that its directors are not disqualified from managing a

corporation, or disqualified from being a responsible

person of a registered charity by the ACNC

Commissioner, and remove any responsible person

who does not meet these requirements.

5: Duties of responsible persons

Charities must take reasonable steps to make sure

that responsible persons are subject to, understand

and carry out the duties set out in this standard.

1 https://www.acnc.gov.au/for-charities/manage-your-charity/governance-standards

http://acnc.gov.au/findacharity

https://www.acnc.gov.au/for-charities/manage-your-charity/governance-standards


Operational environment

The operational context for NFPs has also changed

substantially since 2013. Perhaps the most significant change

has been to the funding practices of governments, including:

• Person-centred funding models such as the National

Disability Insurance Scheme;

• Greater competition in tendering processes, both between

NFPs and increasingly from for-profit providers;

• Amalgamating ‘service areas’ for some contracts, resulting

in larger contracts being distributed among fewer recipients;

and

• Growth in outcomes-based funding and the introduction

of social impact bonds.

The impact of these changes has been felt in different ways.

The AICD’s 2016 NFP Governance Study revealed that 35

per cent of directors had discussed merger in the preceding

12 months, many doing so in response to market pressures

and to become more competitive and effective. This means

that the number and size of NFPs in Australia is fluctuating.

Many NFPs are exploring new ways to survive and

prosper. The Australian Charities Report 2016 revealed a

growth in own-source income (such as from sales, member

fees and user-pays services) to 50 per cent of the total of

charitable revenue.

Many NFPs are being forced to become more commercial

to remain competitive in response to the entry of for-profit

providers into traditionally NFP-dominated markets. This

is reflected in the growing number of social enterprises

bringing commercial approaches to solving social and

environmental problems.

Finally, it is worth noting that media reporting on

misconduct and poor practice in the NFP sector has

intensified in recent years, although not necessarily

reflecting an increase in misconduct. In much of this

reporting there has been direct or implied criticism of

governance in the sector. Governance issues present in media

reports have included:

" It is worth noting that media reporting on misconduct and poor practice in the NFP sector has intensified in recent years, although not necessarily reflecting an increase in misconduct.”


• Harm to vulnerable persons;

• Fundraising and application of donor funds;

• Related party transactions and private benefit; and

• Director and executive remuneration.

Against this backdrop, the Edelman Trust Barometer has

reported a global crisis in institutional trust. Although the

NFP sector has historically enjoyed high levels of public trust,

it has not been immune to the broader downward trend.

The impact of this trend has not been extensively explored

in an NFP context, but it is a concerning development

for a sector that relies on the trust and confidence of the

community to achieve its goals.

The findings of the Royal Commission into Institutional

Responses to Child Sexual Abuse have also highlighted the

responsibilities of organisations working with vulnerable

people, particularly children, and the role of governance in

protecting them from harm. This focus is likely to continue

through the Royal Commission into Aged Care Quality

and Safety.

The future of NFP governance

As the NFP sector has changed, so too have the

expectations the community has of it, particularly

regarding its governance. Aside from failure to meet legal

obligations, in many of the examples of misconduct and

poor practice it is clear that community expectations of

governance have not been met.

Governance must continue to mature to meet the

challenges posed by a more complex and demanding

operational environment. The record number of NFP

directors and executives participating in AICD courses and

events is one indicator of a growing consciousness of the

importance of good governance to the sector.

There is no doubt that governance in NFP organisations

has never been more in the spotlight. Amidst the change

and uncertainty in the sector, strong and appropriate

governance should be a critical priority for all NFPs.

2016 2017 2018

0%

10%

20%

30%

40%

50%

60%57%

52% 52%

48% 48%

45% 45%

37%35%

42%

32% 31%

Not-for-profits Business Media Government

(Source: Edelman, 2018 Edelman Trust Barometer – Australia Results, March 2018)

Figure 2: 2018 Edelman Trust Barometer (institutions)


" There is no doubt that governance in NFP organisations has never been more in the spotlight. Amidst the change and uncertainty in the sector, strong and appropriate governance should be a critical priority for all NFPs.”

20 NOT-FOR-PROFIT GOVERNANCE PRINCIPLES 20 NOT-FOR-PROFIT GOVERNANCE PRINCIPLES


Purpose and strategyPRINCIPLE 1

The organisation has a clear purpose and a strategy that aligns its activities to its purpose








Every organisation will have a purpose. For the

organisation to be successful the purpose must be clear,

and there must be a strategy that sets out how the

organisation will work towards achieving its purpose. There

are five critical questions relevant to determining purpose

and strategy:

? Why does this organisation exist?

? What does this organisation do?

? Who does this organisation benefit?

? How will this organisation achieve its goals?

? What does success look like for this organisation?

What is a purpose?

An organisation’s purpose is what it hopes to achieve. It

is the reason the organisation exists, and all its activities

should contribute to achieving its purpose in some way.

It is the ‘what’ and the ‘why’ of an organisation’s work.

Purpose is the centrepiece of governance in the NFP sector.

NFPs are set up for many different purposes. For example,

NFPs may have purposes such as:

• Promoting participation in a particular sport;

• Supporting the practice of a certain faith; or

• Providing accommodation and care to older Australians.

Some organisations may have more than one purpose.

For example, a faith-based school might have the dual

purposes of providing education and facilitating

religious worship.

Some NFPs may have the same purpose for many years,

while others may find themselves revising their purposes

from time to time or creating new ones entirely. The role

of the board in defining purpose will depend on several

factors such as the maturity of the organisation or

changes in its operational environment such as a cessation

of funding.

Because purpose goes to the heart of an NFP’s identity,

any changes to it are often the product of a collaborative

process involving considerable thought and debate.

Consideration of purpose will typically involve consultation

between directors, staff, volunteers, members and other

stakeholders such as clients and donors. It is important for

an organisation’s stakeholders to understand and support

its purpose if it is to be successful in pursuing it.

!Registered charities must only have ‘charitable purposes’ as are set out in the Charities Act 2013 (Cth). These include purposes such as: advancing health, promoting reconciliation and preventing the suffering of animals.

Understanding purpose

For an organisation to effectively and properly pursue its

purpose, the people involved in the organisation must share

a common understanding about the way that this is done. To

do this, an organisation will have:

• Values that express what the organisation considers to be

good; and

• Principles that express what the organisation considers to

be right.

Together with purpose, these values and principles form the

ethical framework of an organisation. This framework guides

the decisions of the people involved in the organisation and

should be reflected in its policies, systems and processes.

The board should work to embed its ethical framework

into all aspects of governance so that the organisation can

pursue its purpose effectively and in the right way.

Organisational values are discussed in greater detail in

Principle 10: Culture.

Communicating about purpose

An organisation’s purpose should be communicated as

clearly as possible so that it can be easily understood by

everyone involved with the organisation. It is important that

there is clarity about what an organisation aims to achieve

and the way it does this.

There are many ways to communicate about purpose. Many

organisations choose to express their purpose through a

combination of mission and vision statements.

Mission statements describe what an organisation does to

achieve its purpose. They are high-level statements and will

generally aim to provide a clear and succinct summary of

the reason the organisation exists.


For example:

• “To prevent cruelty to animals by actively promoting

their care and protection” (RSPCA Australia);

• “To present opera that excites audiences and sustains and

develops the art form” (Opera Australia); and

• “To support people who are blind or have low vision to

live the life they choose” (Vision Australia).

Vision statements express what an organisation aims to

achieve through its work by describing what the world

would look like if they were successful in achieving their

purpose. Vision statements are aspirational and should be

something that inspires the people involved with

the organisation.

For example:

• “All young Australians are supported to be mentally

healthy and engaged in their communities” (headspace);

• “A world in which all children realise their full potential

in societies that respect people’s rights and dignity” (Plan

International Australia); and

• “For cricket to be Australia’s favourite sport, and a sport

for all Australians” (Cricket Australia).

The way an NFP defines and expresses its purpose is a

matter for the board, but careful consideration should be

given to the way this is done so that any legal obligations

are met. For example, changes to an organisation’s purpose

may affect its eligibility to access certain tax concessions or

registration as a charity.

It is common for an NFP’s purpose to be set out in its

governing document, usually in the form of ‘objects’.

Mission and vision statements are often used to develop

the organisation’s objects so that they can be more easily

communicated and understood.

!In this document the term ‘governing documents’ refers to the documents that set out how an organisation must be run. These documents are usually known as the constitution, charter, rules or articles of association.

In some cases, an organisation’s purpose may be recorded

in several different documents. An organisation might have

relatively simple objects recorded in its constitution which

are developed in greater detail through other sources such

as its strategic plan.

Wherever an organisation’s purpose is recorded, it is

important that it is clear and understood by everyone

involved in the organisation, including the board.

Can an organisation’s purpose change?

An organisation’s purpose may change over time. For

example, the organisation may have achieved its goal, or a

new goal may have arisen. Boards should regularly review

their purpose to make sure that it is still relevant and make

changes if necessary.

!An organisation’s governing documents and any laws that apply to it may set out requirements about how an organisation’s purpose can be changed, including any limits on what the purpose can be.

How often a purpose needs to be revisited will depend on

the nature of the organisation and what its purpose is.

Some purposes may last forever (for example, “to educate

the children of Toowoomba”) whereas others may be time

limited (for example, “to commemorate the centenary of

the ANZAC”).

Sometimes, an NFP’s activities may drift away from its

purpose over time because of a lack of control or because

the relevance of the purpose has diminished. This is called

‘mission drift.’ This can give rise to significant problems and

it is important that the board monitors alignment between

the organisation’s activities and purposes, and takes steps

to address misalignment if it occurs.

It is a good idea to seek legal advice before changing

a purpose, as even small changes may have significant

impacts, such as to an NFP’s entitlement to access

certain tax concessions. Changes to purpose may also be

constrained by other factors, such as the terms of grants

and bequests

Having a not-for-profit purpose

Purpose is important for NFPs, but it is not what sets them

apart from for-profit organisations (businesses). Many

for-profit organisations also have a purpose (for example,

Telstra’s purpose is “to create a brilliant connected future

for everyone”). What sets NFPs apart is that their purposes

are “not-for-profit”.


The ACNC provides the following definition of NFP:

MEANING OF NOT-FOR-PROFIT

Generally, a not-for-profit is an organisation that

does not operate for the profit, personal gain or

other benefit of particular people (for example, its

members, the people who run it or their friends or

relatives). The definition of not-for-profit applies

both while the organisation is operating and if it

‘winds up’ (closes down) i.e. assets and income of

the organisation shall be applied solely to further

its objects and, no portion shall be distributed

directly or indirectly to the members of the

organisation, except as genuine compensation for

services rendered, or expenses incurred on behalf

of the organisation.

This definition does not mean that the people involved

with an NFP cannot benefit from it, provided this benefit

is consistent with the NFPs purpose. For example, an NFP

could provide aged care services to its members provided its

purpose was to provide those services. By comparison, if an

aged care service made a profit from its operations, it could

not share these profits with their members. This would be

private benefit and not consistent with being an NFP.

In most cases, NFPs are required by law to have clauses

in their constitution requiring the organisation to operate

as an NFP. These clauses should set out how an NFP’s

assets and income are to be used when it is operating and

if it winds up.

The ACNC provides example clauses that NFPs can use:

NOT FOR PROFIT CLAUSE

The assets and income of the organisation shall be

applied solely to further its objects and no portion

shall be distributed directly or indirectly to the

members of the organisation except as genuine

compensation for services rendered or

expenses incurred on behalf of the organisation.

THE DISSOLUTION CLAUSE

In the event of the organisation being dissolved,

all assets that remain after such dissolution and

the satisfaction of all debts and liabilities shall be

transferred to another organisation with similar

purposes, which is charitable at law and which has

rules prohibiting the distribution of its assets and

income to its members.

What is strategy?

If an organisation’s purpose is the ‘what’ and the ‘why’

of its work, strategy is the ‘how.’ Strategy brings the

organisation’s purpose to life by setting out the way by

which it will be achieved.

“…If you don’t know where you’re going, any road will get you there, said the Cheshire Cat to Alice…”

Lewis Carroll, Alice’s Adventures in Wonderland, 1865

Strategy is the way an organisation defines its goals and

aligns activities and resources with them. Strategy is also

inherently linked with risk which is discussed in greater

detail in Principle 5: Risk management.

Many organisations will develop a single document to

express their strategy. This helps with communicating

the strategy to the people involved in the organisation.

Wherever a strategy is recorded, it is important that it is

clear, understood by relevant stakeholders and that board

decision-making processes are aligned to it.

Strategic planning

Many organisations use strategic plans to define how

resources and activities will be aligned to a set of goals

within a defined period. Strategic plans typically include

several high-level goals which span several years and are

reviewed at regular intervals.

Strategic plans make it easier to understand and

communicate how an organisation is pursuing its purpose.

Most strategic plans also include measures which are used

to evaluate its performance. They can be useful tools to

communicate with stakeholders about strategy, but they

are not a strategy in and of themselves.


For many organisations, the process of strategic planning

is as important as the plans that result from it. Strategic

planning gives organisations the opportunity to reflect

on their goals and to develop an understanding of their

operational environment which assists in the development

and execution of strategy.

The board’s role in strategy

Strategy is a key responsibility of the board. How the

board performs its role in developing strategy will vary

depending on the organisation’s characteristics.

Some boards will take an active role in strategy

development, working with management and other

stakeholders to define and communicate their short and

long-term strategic direction. In other circumstances, the

board may test and approve the strategy, but it will be

substantively developed by management.

!In this document the term ‘management’ is used to refer to an organisation’s staff, typically, the CEO and executive staff. Not all NFPs employ staff, so in some circumstances this term may not be relevant.

Whatever the board’s contribution to strategy

development may be, its role in providing strategic

thinking in decision-making is critical. Because

directors are not generally involved in the day-to-day

operations of a business, they are able to bring a more

high-level perspective to their work. This is one of the

most significant ways that boards can contribute to the

effective governance of their organisations.

It is common in NFP organisations for directors to be

more ‘hands on’, however care should be taken that this

does not prevent them from bringing the necessary focus

and attention to their role.

For example, boards might consider strategic questions

such as:

? What decisions do we need to make now to meet future financial needs?

? To what extent are we prepared to tolerate failure in pursuit of innovation?

?How does the community’s perception of us impact our ability to achieve our objectives?

Boards should apply a strategic lens to their decision-

making. This means that they should make their decisions

in the context of the strategy, but also consider how their

decisions may impact the organisation’s strategy. For

example, a decision they make could mean that the strategy

needs to be amended.

Making time for strategy

There are many issues that demand boards’ attention.

Although boards should consider the organisation’s

strategy in all aspects of their work, they should also

make time to consider the strategy directly.

Good strategy is designed to suit an organisation’s

operational environment. As a result, strategy must

adapt to changes in the organisation’s context to remain

effective. Boards should review the strategy periodically

and whenever a significant change might impact

its execution.

It is common for boards to reserve time in their annual

calendar dedicated to discuss and think about strategy.

Some boards will do this by making strategy a standing

agenda item while others may hold regular strategy days.

Whatever the case, it is a good idea to create space to

address strategy separately from other matters.


QUESTIONS FOR DIRECTORS

IS THE ORGANISATION’S PURPOSE CLEARLY ARTICULATED AND COMMUNICATED TO STAKEHOLDERS?

HOW DOES THE BOARD KNOW IF THE ORGANISATION’S ACTIVITIES ARE ALIGNED TO ITS PURPOSE?

HOW FREQUENTLY DO THE PURPOSE AND STRATEGY NEED TO BE REVIEWED?

HOW DOES THE BOARD ALIGN ITS DECISION-MAKING WITH THE STRATEGY?

IS TIME SET ASIDE IN THE BOARD’S AGENDA TO CONSIDER STRATEGY?


HelpfulCare

HelpfulCare’s purpose is recorded in its constitution as: “To support people in need through the provision of world-class services delivered with the care of a family.” To bring their purpose to life, they have developed a policy document called ‘Being HelpfulCare’ which explains what their purpose is, what it means and how it is incorporated into their operations.

The board of HelpfulCare has approved a rolling five-year strategic plan which was developed by their Chief Executive Officer (CEO) under the supervision of the board who set expectations of timeframes and consultation. The strategic plan articulates five key goals which help give form to the organisation’s purpose. The board reviews progress towards achieving their strategic goals annually and, as part of that, reflects on how effective its strategy has been. If necessary, the

strategy is refined or changed. It also formally reviews its strategic plan mid-way through its life.

To assist with making strategic decisions, the board of HelpfulCare requires management to provide at least a short explanation for any matter they are asking the board to make a decision on, describing how the issue relates to the achievement of their purposes. Agenda items and management reports are also categorised based on which strategic plan goal they relate to so that the board is always thinking about the relationship between their work and the strategy.

Strategy is a standing agenda item at every second board meeting and the board of HelpfulCare has a dedicated annual strategy day where directors meet for an extended period to discuss strategy, changes in their operational environment and ‘big picture’ ideas.

The Friendlies

The Friendlies’ purpose is recorded in their constitution as “to facilitate and coordinate the goodwill and generosity of the local community.” They have developed an ‘organisational charter’ that expands on this, describing the three main ways through which they aim to achieve this goal.

Every year in December the Friendlies hold a ‘community planning day’ where they identify three key goals for the year through a consultative process with their members. These goals are then

communicated to members and other stakeholders in their monthly newsletter and on their Facebook page. They are reported on at the end of the year in their annual report. This forms their strategic plan.

Twice a year the Friendlies’ board holds a half-day meeting at which they meet with members to talk about their progress towards achieving their purpose and make any refinements necessary based on their consultation.

CASE STUDIES


Roles and responsibilitiesPRINCIPLE 2

There is clarity about the roles, responsibilities and relationships of the board

2.1 Directors’ roles are clear and understood by the board

2.2 Directors understand and meet their duties under the law

2.3 Directors meet any eligibility requirements relevant to their position

2.4 Delegations of the board’s authority are recorded and periodically reviewed

2.5 The role of the board is clearly delineated from the role of management



To achieve good governance, the roles of the people involved

in an organisation and their relationships to one another

must be clear and understood. Because directors are at the

top of the organisational hierarchy, they must make sure that

they understand and meet the responsibilities of their roles.

!In this document the term ‘director’ refers to the people who make up an organisation’s board. In some organisations these people may be known as the board members, committee members, trustees, councillors, governors or by another name.

What is a director?

A director is someone who is validly appointed to be director

of an organisation. Together, the directors of an organisation

form an organisation’s board and collectively have ultimate

responsibility for the company. The process for appointing

a director will generally be set out under an organisation’s

governing documents.

The law also recognises other people who are not formally

appointed as directors but who act as directors (de facto

directors), or people with whose instructions or wishes

directors are accustomed to act (shadow directors). In some

circumstances, it is also possible for a director to nominate

another person to act in their place (alternate directors),

although this will depend on the organisation’s governing

documents and any laws that apply to it.

Before accepting a position as a director, it is a good idea

to ask:

? Do I understand the responsibilities of this role, including my legal duties?

?Am I prepared to dedicate the time and energy to perform this role in the way required?

?Do I have the skills and experience to discharge the responsibilities of directorship?

Only if the answer to these questions is ‘yes’ should a person

accept the responsibilities of directorship.

Sometimes a director of an NFP may also have other roles

within the organisation. For example, a director of a sporting

club may also be a coach, a player or a parent of a player. It is

important for directors to be able to separate these roles and

not allow one to improperly influence the other.

Who can be a director?

Generally, directors must be people over the age of 18

and who consent to taking on the responsibilities of

the position. Otherwise, there is generally no particular

qualification or experience level necessary to become a

director under the law.

There may be requirements in an organisation’s governing

documents or in the laws that apply to it that set out

eligibility requirements for directors. For example, if you

are an undischarged bankrupt, you cannot be a director of a

company under the Corporations Act.

Directors should know whether they are subject to any

eligibility requirements and be satisfied that they continue

to meet them. It is a good idea to set out any eligibility

requirements for directors in a letter of appointment, and

to regularly review whether all directors continue to comply

with these requirements.

Directors’ duties

There are two sources of directories duties: general law

and statute.

Under the general law, directors have duties that are based

on the relationship they have with the organisation. This is

a special relationship based on trust; a relationship akin to

being the trustee of someone else’s money, and for this reason

directors’ duties are sometimes called ‘fiduciary duties’.

Directors’ duties are usually also set out under statute,

though the way this is done will depend on how the

organisation is incorporated.

The four main legal duties based on general law and statute

are to:

1. Act in good faith and for a proper purpose

This duty has two parts. Firstly, acting in ‘good faith’

means that directors must act honestly, fairly and

loyally. It requires that directors act in the best interests

of the organisation (rather than in their own personal

interests). The requirement to act for a ‘proper purpose’

means that a director’s decisions must further the

organisation’s purpose and be made within the board’s

legitimate authority.

2. Act with reasonable care, skill and diligence

Directors must take their roles seriously and be

diligent in the exercise of their responsibilities. That

includes taking the necessary time to prepare for


board meetings, keeping abreast of the organisation’s

activities and understanding the organisation’s financial

position (including making sure the organisation can

pay its debts when they are due), and attending and

participating in board meetings.

3. Not to improperly use information or position

Information provided to directors to support them to

fulfil their roles must only be used for the benefit of the

organisation. Directors cannot use information provided

to them as a director, or their role as a director, to harm

the organisation or to gain an improper advantage for

themselves or another person or organisation.

4. Disclose and manage conflicts of interest

Conflicts of interest are often unavoidable. They do not

represent a problem in and of themselves. However,

where a conflict of interests do arise, directors must

disclose them, and manage them appropriately. Conflicts

of interest are explored in more detail in Principle 9:

Conduct and compliance.

There is some misconception that directors who are not

remunerated for their work (sometimes called

‘volunteer directors’) are subject to lower standards of

legal responsibility. This is not the case, and individuals

should think carefully before accepting the

responsibilities of directorship.

There are several laws that set out the specific duties to which

directors are subject. For example, there are directors’ duties

under the common law, the laws that govern incorporated

associations and under the Corporations Act. The ACNC

governance standards also refer to directors’ duties.

ACNC GOVERNANCE STANDARD 5: DUTIES OF RESPONSIBLE PERSONS

• To act with reasonable care and diligence;

• To act honestly and fairly in the best interests of

the charity and for its charitable purposes;

• Not to misuse their position or information they

gain as a responsible person;

• To disclose conflicts of interest;

• To ensure that the financial affairs of the charity

are managed responsibly; and

• Not to allow the charity to operate while it is

insolvent.

Often an organisation’s governing document will also set

out certain legal duties and require directors to comply

with them. The ACNC has published a template constitution

for NFP companies limited by guarantee which is a useful

resource for organisations.2

It is a good idea in a letter of appointment for all new

directors to set out the legal duties and to revisit these

regularly as part of ongoing director development so

that directors understand and are meeting them. This is

discussed in greater detail in Principle 3: Board composition

and Principle 4: Board effectiveness.

There also are other specific legal obligations imposed on

directors regarding issues such as work health and safety,

tax and the environment.

To whom do directors owe their duties?

Directors’ duties reflect the relationship that directors

have with the organisation and its members. Directors

are entrusted with the responsibility of governing an

organisation and so the law expects that they will act in

the best interests of the organisation and be accountable

for their actions.

Directors owe their duties to the organisation as a

whole – meaning that they must act in the best interests of

the organisation and its members. It is assumed that

the organisation will exist on an ongoing basis (in

perpetuity), and as such the interests of future members

should also be considered.

In exercising their responsibilities, it is a good idea for

directors to consider how their decisions might impact

other stakeholders who are not members, such as clients

and community members. This may be beneficial to the

organisation’s strategy and assist with improved decision-

making, but it is important to recognise that directors do

not have a specific legal duty to act in the interests of

these stakeholders (aside from obligations arising from

other specific laws, for example regarding environmental

protection or WHS).

Some directors are appointed to the board to contribute

the perspective of a certain stakeholder group. For

example, a federated organisation might appoint directors

from its state and territory divisions to its national board.

This can provide valuable insight and promote a sense of

involvement among stakeholders. 2 https://www.acnc.gov.au/tools/templates/constitution-charitable-company-limited-guarantee


However, it is important to recognise that even though a

director may be appointed because of their relationship

to a stakeholder group, they must exercise their duties in

the interest of the organisation and apply an independent

mind to their responsibilities.

Role of the board

The board is responsible for the overall governance,

management and strategic direction of the organisation.

As a result, the board has ultimate accountability for

its activities and performance. Boards are comprised of

an organisation’s directors who can only exercise their

authority when acting as a collective.

This also means that directors may still be held legally

responsible for decisions of the board, even

though they may not have supported it individually.

!In this document the term ‘board’ refers to an organisation’s governing body (its directors acting as a collective). In some organisations these people may be known as the committee of management, council or by some other name.

The role of the board may vary slightly depending on

the nature of the organisation. The boards of smaller or

newer organisations, or those without paid staff, may

have a more operational focus, whereas the boards of

larger and more established organisations may take a

more strategic approach to their work. Boards must

decide for themselves how best to contribute to their

organisation to make a positive impact and to meet their

duties under the law.

The role of the board can be broken down into six

different dimensions:

Strategy Establish strategies to guide, monitor and control the organisation’s activities.

Resources Make resources available to achieve the strategy and oversee their use.

Performance Monitor the organisation’s performance.

Compliance Oversee processes to comply with legal and regulatory requirements.

Risk Oversee a risk management framework that supports informed decision-making by the organisation.

Accountability Report progress and align the collective interests of members, stakeholders, board, management and employees.

To assist in defining the role of the board and understanding

its legal obligations, many boards choose to develop a

board charter to govern the way the board works and fulfils

its responsibilities. This is a document that sets out the

respective roles, responsibilities and authorities of the board.

Delegation of the board’s authority

The board has ultimate responsibility for and control over

the way an organisation is run, except in some matters

which may require the involvement of members (such as

changing the organisation’s governing documents). However,

boards can choose to delegate part of their authority to

others, such as an organisation’s staff and volunteers.

An organisations’ governing documents (particularly its

constitution) and any other laws that apply to it may limit

the ability of the board to delegate its authority.

There are some parts of the board’s authority that are

considered good practice to be reserved for the board or

which the board may be required to retain under the law, for

example:

• Appointing, overseeing and evaluating the performance of

the CEO;

• Approving the budget and strategy; and

• Reviewing and approving financial reports.

It is important that any delegation of the board’s authority

is clearly defined and recorded appropriately and regularly

reviewed. One of the ways this can be done is through

establishing delegation policies that set out which of

the board’s authorities are being delegated and the

circumstances under which they can be exercised.

!The board may delegate some of its authority, but it cannot delegate its responsibility. The board is still ultimately accountable for any of its powers that are exercised by others on its behalf.


Board committees

Many boards establish committees to assist with their

work. Committees can also be a helpful way to build

and access expertise as committee members do not

necessarily have to be directors. Some committees may

operate for a defined period (for example, to oversee the

appointment of a new CEO) and are referred to as ‘ad hoc

committees.’ Others may operate on an ongoing basis (for

example, a fundraising committee) and are referred to as

‘standing committees’.

For example, many boards will establish an audit

committee to assist the board on an ongoing basis with

oversight of financial reporting and the appointment

of the auditor.

!Although the board may delegate some of its responsibility or authority to a committee, the board is still accountable for the operation of its committees and for the use of any delegated authority by those committees.

One way this can be done is through establishing a

committee’s ‘terms of reference’ which include:

• What the committee’s purpose is;

• What its powers are (if any);

• Who its members will be;

• Who its chair will be;

• How often it will meet;

• How it will report to the board; and

• How often it will be reviewed.

The role of the chair

In the boardroom, the chair is primus inter pares – first

among equals. Their role is to manage the business of

the board both inside and outside of the boardroom.

The chair does not hold greater authority than any other

director but will generally have additional responsibilities.

!In this document the term ‘chair’ refers to the person who leads and manages the business of the board. In some organisations this person may be known as the president, convenor or by some other name.

In the boardroom, the chair has a number of

responsibilities such as facilitating discussion, ensuring

that agenda items are dealt with in sufficient detail and

that decisions are made appropriately.

The chair also has a number of responsibilities outside

the boardroom including overseeing an appropriate flow

of information to the board and maintaining a close link

between the board and management. The role of the

chair is often characterised as managing the business

of the board because the chair is generally responsible

for board’s operations, including setting its agenda and

approving board papers. It is important that there is a

strong, collegiate relationship between the chair and the

CEO.

The role of the chair is generally not set out in law.

However, an organisation’s governing documents may set

out requirements such as how the chair is appointed and

what their responsibilities are.

The role of the company secretary

Many boards appoint a company secretary (in some

NFPs this person could be called the ‘public officer’) to

facilitate corporate governance processes and support the

operation of the board. The company secretary generally

has responsibility for coordinating board minutes and

papers, and monitoring compliance of the board and its

committees with the law, the organisation’s governing

documents and its internal policies. For companies, the

Corporations Act specifically requires that the board

appoint the secretary (s204D).

It is common for the company secretary to also have

other roles within the organisation such as being general

counsel. In smaller NFPs, the company secretary is often

one of the directors.

The company secretary often has other obligations

outside the boardroom. For example, the company

secretary may take on responsibility for liaising with

regulators on behalf of the board and complete timely and

proper completion of any returns, such as the obligation

of charities to notify the ACNC when a director is added

or removed from the board. The organisation’s governing

document or the laws that apply to them may also set out

specific responsibilities for the company secretary.


It is common for the company secretary to report both

to the CEO and to the board. Directors should be able

to communicate directly with the company secretary

without having to go through the CEO. Often the decision

to appoint and remove a company secretary will be left to

the board.

!An organisation’s governing documents and any laws that apply to it may set out requirements about who can be appointed as company secretary and the way this must be done.

The role of management

Directors act collectively to provide governance and

oversight of an organisation and will typically meet

several times per year for a limited period of time. It

is not practical for boards to direct the day-to-day

operations of an organisation, or to perform themselves

the tasks necessary for an organisation to achieve its

goals. For this to happen, the board must delegate

some of its authority to ‘management’ (paid or unpaid

workers).

For example, the board will generally delegate authority

for the CEO to use the organisation’s financial resources

within the limits set by the budget and in alignment

with the strategy. It is important that any delegation of

the board’s authority to management is recorded and

regularly reviewed.

!Although the board may delegate some of its responsibilities or powers to management, the board is still ultimately accountable for management and for the use of any delegated authority by management.

The board oversees the strategy while management

develops and implements the plans to achieve it. Boards

are expected to operate on a more long-term and

strategic basis. By comparison, management should be

concerned with the more immediate operational needs of

the organisation.

“A company in many ways may be

likened to a human body. It has a brain

and a nerve centre which controls what

it does. It also has hands which hold

the tools and act in accordance with

directions from the centre. Some of

the people in the company are mere

servants and agents who are nothing

more than hands to do the work and

cannot be said to represent the mind or

will. Others are directors and managers

who represent the directing mind and

will of the company and control what it

does.”Lord Justice Denning, HL Bolton (Engineering) Co Ltd v TJ

Graham and Sons Ltd, 1957


In practice, the division of responsibility between the

board and management may be less defined. It may be

possible in theory to divide responsibilities between

the board and management, but it is likely that the line

between the two will shift as an organisation’s needs and

environment changes.

Boards should take an active role in considering where

this line is drawn and in reviewing whether the focus of

their discussions is appropriate to make sure they, and

management, are making the most impactful contribution

to the organisation.



DO DIRECTORS UNDERSTAND AND MEET THEIR RESPONSIBILITIES, INCLUDING LEGAL DUTIES?

ARE THE ROLES AND RESPONSIBILITIES OF THE BOARD AND INDIVIDUAL DIRECTORS CLEAR?

ARE ANY DELEGATIONS OF THE BOARD’S AUTHORITY CLEARLY RECORDED AND REGULARLY REVIEWED?

IS THERE AN APPROPRIATE SEPARATION BETWEEN THE ROLE OF THE BOARD AND OF MANAGEMENT?

ARE DIRECTORS SUBJECT TO ANY ELIGIBILITY REQUIREMENTS AND ARE THEY CONTINUING TO MEET THEM?


HelpfulCare

The board of HelpfulCare has established a board charter that broadly sets out the roles and responsibilities of its directors, the eligibility requirements that apply to them, and their duties under the law. The charter is a board-approved policy document and is reviewed annually so that it is relevant and to keep it fresh in the minds of directors.

HelpfulCare also has a board policy handbook that includes a range of governance policies about how the board will operate. The handbook includes policies that explain in detail the roles and responsibilities of directors, the chair, the CEO and the company secretary.

The handbook also includes a policy on how the board will use committees. In line with the policy, the board of HelpfulCare has established three committees, each with its own terms of reference that are approved by the board and reviewed every two years. The HelpfulCare board has an audit committee, a risk committee; and a nominations committee.

The board’s delegation policy sets out how the board’s powers may be delegated to management or to committees. The policy also requires that any delegation be reviewed after a certain period. Delegations of the board’s authority are also recorded in a register so there is clarity for the people involved with the organisation on who has delegation and how it is to be exercised.

The Friendlies

When calling for nominations for directors, the Friendlies provides a copy of a position description for directors which explains what the board and directors do.

When people are appointed as directors, they receive a letter of appointment from the chair which sets out the expectations of their roles. The letter includes matters such as eligibility requirements for directors, minimum attendance at board meetings and their general legal duties. Directors are required to sign and return the letter, which affirms that they understand their responsibilities and meet the relevant eligibility requirements, and they will advise the board if they are no longer eligible.

The Friendlies employ one staff member (their part time coordinator). Their position description is set out in their employment contract, which also explains their responsibilities and their relationship to the board.

The Friendlies do not have any ongoing committees. However, from time to time they establish ad hoc committees for specific projects. In the past they have had committees for coordinating their ten-year anniversary and for reviewing their constitution. When they established the committees and their terms of reference, they also record these details in the board minutes.

CASE STUDIES


Board compositionPRINCIPLE 3

The board’s structure and composition enable it to fulfil its role effectively

3.1 Directors are appointed based on merit, through a transparent process, and in alignment with the purpose and strategy

3.2 Tenure of directors is limited to encourage renewal and staggered to retain corporate knowledge

3.3 The board reflects a mix of personal attributes which enable it to fulfil its role effectively

3.4 The board assesses and records its members’ skills and experience, and this is disclosed to stakeholders

3.5 The board undertakes succession planning to address current and future skills needs in alignment with the purpose and the strategy



Having the right people around the table is critical

to the effectiveness of a board. Boards should look

critically at who their directors are and how they are

appointed. There is no one-size-fits-all ideal structure

and composition for boards. Instead, the directors must

decide what form their board should take and give

consideration to how this might change over time.

Appointing directors

Directors are generally appointed by:

• direct appointment by the board; or

• election by the members.

Organisations may use either of these methods or a

combination of the two. Generally, an organisation’s

governing documents and any laws that apply to it will

set out requirements about who can be appointed as a

director and by what process they must be appointed.

It is a good idea to set out the process for appointing

directors in a policy. This policy should include matters,

such as who is eligible to be a director, how they can

nominate and any processes that must be followed

so that their appointment is valid. Making this policy

available to stakeholders, especially members, can help

promote transparency and will help prospective directors

to understand the process.

If directors are appointed by election, it is important the

process is transparent. One way that this can be achieved

is through appointing an impartial third party (sometimes

called a ‘returning officer’) to oversee the process so

that it is fairly and properly run. Often an organisation’s

governing documents will set out the requirements in

relation to the election process.

Tenure of directors

Directors are generally appointed for a fixed term. The

total time that they are appointed for (which may include

several terms) is referred to as ‘tenure’.

Once a director’s term concludes they will either be

reappointed for another term or they will cease to be

a director. An organisation’s governing documents will

generally set out requirements about how long a director

is appointed for, whether they can be reappointed and,

if so, whether there is a limit to the number of terms (or

years) that a person can serve as a director.

It is a good idea for a director’s tenure to be limited to

encourage renewal. Although there may be good reason

for a director to serve for an extended period in certain

circumstances, there are many benefits to bringing fresh

perspectives onto a board.

Boards should consider how a director’s tenure may

impact their performance, particularly if serving for

ten years or longer. Even if a director does serve for an

extended period, limiting tenure will encourage regular

review about whether their appointment continues to be

in the best interest of the organisation.

It is also important to consider how the mix of tenure

on a board might affect the retention of institutional

knowledge. If too many directors depart at once, this

could result in the loss of important history and context,

which helps the board to make good decisions. Directors

also play an important role in mentoring their peers and

so it is important that new directors can work with, and

learn from, more experienced directors as part of their

induction process.

For this reason, it is a good idea to stagger board tenure

so that the number of departing directors, new directors

and ongoing directors is balanced.

Measuring skills and experience

To understand what skills they have, address shortages

and forecast future needs, many boards quantify and

record their directors’ skills and experience in a ‘skills

matrix.’

A skills matrix is a document that profiles its directors’

skills and experience. There are several ways that this

can be presented, including which skills are highlighted

within the matrix. Boards should consider what skills and

experience are relevant to them in the context of their

purpose and strategy.

The example simple skills matrix below demonstrates

how three fictional board members have been assessed

against a set of general criteria. Some more detailed

matrices will ask directors to assess their proficiency

within the set criteria.


Figure 3: Example board skills matrix

Acc

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Lega

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Hum

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Reso

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Tech

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Mar

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ng

Fund

rais

-in

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Indu

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Gov

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nanc

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Med

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Ris

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Gov

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Amrita Chandra √ √ √ √ √ √

Jose Garcia √ √ √ √

Rashia Abdi √ √ √ √ √ √

While technical skills are important, boards should look

beyond these to consider the other attributes of directors

such as a passion for the organisation’s purpose and soft

skills such as communication, negotiation and conflict

resolution. One of the more challenging balances to strike

is in having diverse perspectives and encouraging robust

debate while maintaining a respectful and cohesive

working relationship between directors. The absence

of a collegiate approach to decision-making can lead to

dysfunction and decision paralysis.

It is a good idea for boards to disclose their members’

skills and experience to stakeholders to help them

understand who is responsible for governing the

organisation. Although some boards may disclose a full

skill matrix as in the example of Figure 3, NFPs will

also provide this information in an anonymous way. For

example, through recording how many directors have a

certain skill without disclosing which particular directors

have this skill.

The skills matrix can also be a useful way to identify areas

for board training, development and succession planning.

Size of the board

Boards need to have enough members to fulfil their

responsibilities, access the skills and experience they

need, and to facilitate changes to composition without

major disruption. However, if the board is too large it

may be difficult for all directors to contribute and this

may undermine its effectiveness.

Boards must determine for themselves, within the limits

imposed on them by their governing documents and the

law, what the ideal board size is for their circumstances.

Generally, NFP boards tend to be between six and 11

people, though they may be smaller or larger.

An organisation’s governing documents and any laws that

apply to it may set out requirements about the minimum

and maximum number of directors a board may have.

There may also be requirements about how many directors

must be present at a meeting for it to be valid (quorum).

Succession planning

Succession planning refers to taking a methodical

approach to projecting the future skill and experience

needs of the organisation, and putting plans in place to

meet them. Boards should forecast when vacancies will

arise and identify suitable candidates to facilitate smooth

transitions between directors.

It is important that a board is prepared to respond to

and meet the gaps created by the natural rotation of

directors, or more unexpected events such as sudden

illness or death. Boards should engage in succession

planning not only for directors, but also for the CEO

and other senior staff. This is not always a precise

activity, and so boards should be prepared to be flexible

in their approach.

One way this can be done is through maintaining a list of

suitable and interested candidates to create a pipeline of

prospective directors that can be drawn on in response

to need. Some boards use more structured programs

such as allowing prospective directors to be ‘observers’,

so they can learn about the board’s business (without

participating in decision-making) and be better prepared

when a vacancy arises. It is also common for boards to

appoint people to committees with a view to preparing

them to become directors in the future.

It may be helpful to get advice from a recruitment

consultant to deepen the talent pool of potential

new directors.


Board diversity

One of the benefits of having a board is that it brings

several minds to focus on a shared purpose. This benefit

is multiplied when directors bring diverse perspectives

to bear on their work, making available different ways of

processing information and solving problems.

Governance is a team sport, and as with any sports

team it is the quality of the team overall (and not any

individual member) that defines its success.

The arguments for the importance of board diversity

have their roots in social justice, drawing on principles of

equality and fairness. However, research demonstrates

that diversity on the board can contribute to improved

performance. Diverse boards have also been shown to

increase staff retention and engagement, promote a

better understanding of an organisation’s stakeholders

and drive innovation. Diversity also assists in deepening

the talent pool from which to draw staff, executives and

directors.

Boards should aim to reflect a mix of personal attributes

in their composition. This may include:

• Gender;

• Cultural and linguistic background;

• Professional experience;

• Sexuality;

• Attitudes;

• Age;

• Educational qualification;

• Lived experience;

• Technical skills;

• Socioeconomic background;

• Marital or family status;

• Boardroom behaviours;

• Religious belief; and

• Gender identity.

Research has shown that it is not only the diversity of

personal attributes which influence a board’s performance

but also diversity in thinking style. This is referred to as

‘cognitive diversity.’

Diverse boards also send an important message about

the values of an organisation and the society it wishes

to create. There has been a significant focus on the

representation of women on boards for many years

which recognises the imbalance of female participation in

the workforce, particularly in senior roles. Much progress

has been made in this regard, but there is also increasing

focus on other aspects of diversity, such as the under

representation of people from culturally and linguistically

diverse backgrounds.

Achieving board diversity

Diversity can be a challenging goal for organisations to

achieve. For many NFPs, simply finding someone who is

willing to serve as a director can be challenging enough,

let alone representing multiple diverse attributes in a

small cohort of people. This difficulty can be compounded

for organisations whose directors are appointed by

election where the board may have limited opportunity

to influence its composition.

One way through which boards can aim to achieve

diversity is through establishing a diversity policy.

This is a policy that both expresses the organisation’s

commitment to achieving diversity and outlines the

practical measures the organisation will take to achieve

diversity. For example, a diversity policy might:

• Set targets for the representation of certain personal

attributes (such as gender) on the board or in the

staff cohort, and measure and publicly report on

performance against these targets;

• Commit to inclusive and flexible employment practices

such as providing reasonable adjustments to physical

work environments for people living with disability,

and providing flexible working arrangements to support

different lifestyle needs;


• Support programs that encourage and celebrate

diversity such as cultural awareness training and

networks for lesbian, gay, transgender and intersex

people and their allies; and

• Require that recruitment practices are inclusive to

guard against conscious and unconscious bias in

selection processes.

Setting performance targets around diversity is important

because what gets measured gets done. For example,

many boards in the private sector have committed

to ensuring at least 30 per cent of their board are

women because this number has been shown to be the

‘tipping point’ after which diversity will usually become

entrenched in an organisation’s culture.

"Setting performance targets around diversity is important because what gets measured gets done..”



IS THE PROCESS FOR APPOINTING DIRECTORS CLEARLY DEFINED, TRANSPARENT AND FOLLOWED?

WHAT IS THE BOARD’S CURRENT SKILLS MIX, AND HOW IS IT COMMUNICATED TO STAKEHOLDERS?

WHO WILL BE LEAVING THIS BOARD IN THE NEAR-TERM FUTURE AND IS THERE A PLAN TO RESPOND?

WHAT SKILLS WILL THE BOARD NEED IN THE FUTURE AND HOW WILL THEY BE ACCESSED?

WHAT STEPS HAS THE BOARD TAKEN TO PROMOTE DIVERSITY?


HelpfulCare

HelpfulCare has six directors. Each director is appointed for a three-year period. The appointments are staggered so that there are never more than two members departing the board at any one time (unless they depart for other reasons, including resignation). The constitution allows the appointment of members to casual vacancies. The board has a composition policy which they use to assist them in making decisions to appoint directors.

The composition policy sets out the skills and experience it is seeking from its directors. The board reports its directors’ skills against five key dimensions:

• Sector knowledge;

• Strategy and risk;

• People, culture and conduct;

• Financial acumen; and

• Regulation and governance.

The number of directors with each skillset is communicated through the annual report. The board has also set a quota of having 40 per cent women on its board, and its performance in this regard is also communicated in the annual report.

HelpfulCare’s board review their composition annually and consider this in the context of succession planning. The board’s nominations committee is charged with identifying and developing relationships with suitable candidates for board roles consistent with the requirements of the composition policy.

The Friendlies

The nine directors of the Friendlies are elected by the membership at their annual general meeting. Directors are elected for a two-year period. The Friendlies’ constitution sets out how elections are to be held, including if directors can be reappointed after their two-year term. The relevant parts of the constitution are circulated to members in advance of the annual general meeting.

The Friendlies communicate their directors’ skills and experience by including profiles of them in their annual report. The board maintains a skills matrix but this isn’t disclosed to stakeholders. At the annual general meeting, the president makes a statement (approved by the board)

about the skills gaps they are seeking to address. At the meeting, those nominating for a position are allowed the time to address the members about how their skills and experience would benefit the organisation.

At the discretion of the president, members are permitted to attend for non-confidential parts of a few board meetings to act as ‘observers’. The immediate past president has a special role set out in the constitution which enables them to continue on the board for one year in order to provide continuity, and to take a mentoring role with new members, at the board’s discretion.

CASE STUDIES


Board effectivenessPRINCIPLE 4

The board is run effectively and its performance is periodically evaluated

4.1 Board meetings are chaired effectively and provide opportunity for all directors to contribute

4.2 Directors seek and are provided with the information they need to fulfil their responsibilities

4.3 Directors are appropriately inducted and undertake ongoing education to fulfil their responsibilities

4.4 The board’s performance, as well as the performance of its chair and other directors, is periodically evaluated

4.5 The relationship between the board and management is effective



For a board to be effective it must take a thoughtful,

disciplined and professional approach to its work.

This can be done through careful forward planning of

board business, efficient operation of board meetings,

regular performance assessments and effective chair

arrangements. This is true not only for the board, but also

for its committees.

Board agendas

An agenda is a document that sets out what business

will be considered at a meeting. It lists the matters being

addressed, the order in which they will be discussed

and how much time is allocated for each. Agendas help

directors to prepare for meetings and align their focus

to the work of the board. They also assist the chair in

ensuring that issues are dealt with in an appropriate

order and depth during the meeting.

Board agendas are usually prepared by the chair with

the assistance from the CEO or company secretary. It is

a good idea for the chair to invite directors to contribute

to the formulation of the agenda, however, generally the

chair has final say on the agenda. That said, directors

should always have opportunity to raise issues for the

attention of the board at meetings. This is usually done

through a standing agenda item of ‘other business.’

Effective agendas will specify the expected outcome of

each item before the board. The agenda should indicate

whether each item is for decision, for discussion, to be

noted or presented as information only. It is helpful if

agendas indicate this as some matters cannot be deferred

and directors should come prepared to act.

Board meetings

For the most part, the work of a board is conducted

through meetings. Boards can only exercise their

authority as a group, and so meetings provide the

opportunity for directors to gather, deliberate and

exercise their authority.

How meetings happen will vary between organisations.

Within any limits set by the law and by their

governing documents, boards can generally determine

for themselves how they meet including with what

frequency, by what method (in person or electronically)

and at what time.


apply to it may set out requirements about how meetings

are held. For example, there may be requirements about:

• When and how directors must be notified of a board

meeting;

• How many directors must be present for a meeting to

be valid (quorum);

• Whether meetings must be held in person or

electronically;

• How decisions are made at meetings (for example, by

poll or by show of hands);

• How decisions can be made without a board meeting

(usually in writing following a particular process, which

may be necessary for urgent matters);

• How many meetings must be held in a year; and

• Any minimum attendance requirements for directors

It is a good idea for the requirements around how a board

conducts its meetings to be set out in a policy document.

!

Many laws now are ‘technology neutral’ meaning that they do not specify or require the use of a particular technology. However, it is a good idea to check your governing documents and any laws that apply to your organisation about how meetings must be held.

Making decisions

The most important function of a board meeting is to make

decisions. This is how the board exercises its authority.


apply to it may set out requirements about how decisions

must be made. For example, under the Corporations Act,

decisions can only be made when supported by a majority

of directors unless otherwise specified in an organisation’s

governing documents.

Many boards, particularly NFP boards, aim to make

decisions by consensus (by general agreement). This

means that through discussion a board aims to make a

decision that has the broad support of most, if not all,

directors. However, once a decision has been made, all

directors (even those who may not have agreed with the

decision) will be held responsible for it.

Board minutes

Board minutes are used to record the activities and

decisions of a board. They are not a transcript of every

word that was said during a meeting or a record of

directors’ individual contributions.


!An organisation’s governing documents and any laws that apply to it may set out requirements about how minutes must be recorded, for how long they must be stored and to whom they must be made available.

If possible, it is a good idea for the minutes to be taken

by someone who is not participating in the meeting

so that those people participating can focus on the

meeting. Often the minutes will be taken by the company

secretary. The person who takes the minutes should be

someone who is trusted to hear confidential information

about the board’s business.

The board should approve the minutes of each meeting

to confirm that they are an accurate record of their

work. It is a good idea for draft minutes to be circulated

to the board soon after a meeting while the business of

the meeting is still fresh in directors’ minds and then

approved before or at the next meeting.

The amount of detail included in the minutes will vary

between organisations. Generally, minutes will include

matters such as:

• What meeting was held, where and when;

• The names of attendees and any apologies;

• Any conflicts of interest declared;

• Matters discussed at the meeting; and

• Any decisions made by the board.

Minutes are one way that a board can demonstrate its

accountability for its decisions. For significant decisions,

it is a good idea to briefly outline any factors that were

considered in decision and the amount of time allocated

for discussion. This can help to establish that directors

have exercised proper care and diligence in the exercise

of their authority.

It is important to note that minutes can be used as

evidence in legal proceedings and as such it is important

to take care in the preparation of board minutes.

Board papers

Directors are responsible for ensuring they have access to the

information they need to make their decisions. This is part

of their duty to act with care in diligence which is discussed

in greater detail in Principle 2: Roles and responsibilities. One

of the ways they do this is through requesting and receiving

information in the form of board papers.

Board papers are usually prepared by people who are not

directors, but who understand the board’s needs such

as the CEO or company secretary. Information in board

papers should be consistent, coherent and complete.

Board papers are part of the official records of the

company and should be maintained in accordance with

any requirements regarding recordkeeping that may

be set out in an organisation’s governing documents or

under the law.

It is the responsibility of directors to read and understand

the information contained in board papers. If directors feel

they need more information to perform their roles, it is their

responsibility to seek it out. To do this, it may be necessary

to consult with an organisation’s staff and directors should

do this by working with and through the CEO.

“The more things that you read, the

more things you will know.

The more that you learn, the more

places you’ll go.”Dr Seuss

In some circumstances, directors may also need to access

the independent advice of external experts such as legal

practitioners, for example in relation to the exercise of

their legal duties.

Planning board business

A well-planned meeting schedule helps identify the

key issues for the board’s attention and helps directors

address issues in a timely and logical manner.

Many organisations use a ‘board calendar’ which assigns

important and recurring governance matters to scheduled

meetings in a single document. Board calendars help

directors to govern effectively by aligning the focus of

the board to its priorities and obligations for the year.

Board calendars can also help prevent items from being

overlooked and assist directors to take a more long-term

view of their work.

One way to develop a board calendar is to list the key

issues that a board will need to consider throughout

the year and allocate them to a particular meeting. The

example below demonstrates how this can be done with

regard to the board’s focus on finance matters.


Figure 4: Example board calendar – finance matters

J F M A M J J A S O N D

Finance

Budget review and approval

√

Review of annual financial report

√

Management accounts review

√ √ √ √ √ √ √ √ √ √ √ √

Investment strategy review

√ √

Inducting board members

Directors have all the responsibilities that come with

their roles from the moment they are appointed. As

such, it is important that they are prepared to fulfil their

responsibilities. A thorough induction process can assist

with this.

It is a good idea for new directors to receive a letter of

appointment that sets out what their responsibilities are

and any other information relevant to their appointment.

This letter should also outline the process for induction.

The induction process should be tailored to reflect the

circumstances of the organisation as well as the skills

and experience of the new director. Generally, induction

processes will include:

• Providing information such as the governing

documents, board charter, the strategic plan, recent

board papers and minutes, board policy handbook, and

the board calendar;

• Introduction to key individuals including the CEO and

senior staff, the chair and other board directors;

• Establishing a mentoring relationship with a more

experienced director; and

• Providing briefing and training to familiarise new

directors with the organisation and their responsibilities

as directors, including regarding key organisational

risks.

After a board member has been inducted, seeking their

feedback about the process is a good way to identify any

additional learning needs, and to improve the process for

future inductees.

Chairing board meetings

The role of the chair is critical in supporting effective

meetings. Outside the boardroom, the chair plays

an important role in setting the board’s agenda and

in ensuring that board members have access to the

information they need to fulfil their responsibilities.

Inside the boardroom the chair facilitates discussion so

that all agenda items are dealt with appropriately.

The chair also plays an important role in setting the

tone for the board and aligning discussions to the

organisation’s purpose. Board meetings should be

collegiate, and the chair facilitates this by setting the

example of behaviour and by providing clarity of purpose

to decision-making. The chair should provide opportunity

for all directors to be heard, and facilitate and enforce

respectful conduct between directors.

Board-management relations

An effective relationship between the board and

management contributes significantly to the effective

operation of the organisation. Although management

reports to the board, it is important that the relationship

between the two is based on mutual trust and respect.


Management and the board must work together as a

team to achieve the organisation’s purpose. For this

relationship to be effective, each must understand and

respect the role of the other. Directors must be prepared

to seek and accept management’s advice, but to do so in a

way that is constructively critical and challenging without

undermining trust or being unduly interfering.

This can be a challenging dynamic and while it is a good

idea to record how this relationship is managed in a

policy document such as a board charter, its impact is

felt in the translation of these principles into practice in

the boardroom.

Because directors do not have individual executive

authority within an organisation, their interactions with

management should generally be channelled through the

chair and CEO. It is not the role of individual directors

to supervise or direct the work of staff or volunteers.

It is a good idea for board members to keep the CEO

informed about any relevant interactions they have with

management as a courtesy.

Chair-CEO relations

The relationship between the chair and the CEO is critical

to the effective operation of the board and, by extension,

the organisation. The chair represents the board to the

CEO and acts as a conduit for communication between

the board and CEO between board meetings.

It is a good idea for the chair and the CEO to meet on

a regular basis outside board meetings to develop this

relationship and to provide opportunity for frank and

open discussions. Often the chair will act as a mentor and

sounding board for the CEO, working closely together to

align the activities of board and management.

The chair will also generally take responsibility

for leading the process around CEO remuneration,

performance and succession planning. It is also common

for the chair to lead the process for CEO appointment

and, if necessary, disciplinary action or dismissal.

Reviewing the performance of the board

The board should work to continuously improve the way

it fulfils its responsibilities. To enable this, it is common

for boards to undertake formal performance reviews

which help to identify gaps in the governance framework

and opportunities to develop. The aim of this exercise

is to evaluate the effectiveness of the board and may

include a focus on the board, its committees, individual

directors, the chair or a combination of these.

How an evaluation is done and with what frequency

is a matter for the board to consider, but it is a good

idea to have a formal process that outlines how these

are to be undertaken. Board evaluations may be done

either internally or by use of an external consultant. It is

common for boards to undertake an internally-managed

board review on an annual basis and an externally

facilitated review every few years.

The chair generally has responsibility for overseeing the

process of board evaluation, often with the assistance of

a committee.

"Management and the board must work together as a team to achieve the organisation’s purpose. For this relationship to be effective, each must understand and respect the role of the other.”



HOW WELL PREPARED ARE NEW DIRECTORS TO TAKE ON THEIR RESPONSIBILITIES?

DO DIRECTORS HAVE ACCESS TO THE INFORMATION THEY NEED TO MAKE INFORMED DECISIONS?

IS THERE A TONE OF RESPECT AND COLLEGIALITY IN BOARD MEETINGS?

DO DIRECTORS UNDERSTAND THE DELINEATION BETWEEN THE ROLES OF BOARD AND MANAGEMENT?

WHAT STEPS IS THE BOARD TAKING, OR SHOULD THE BOARD BE TAKING, TO IMPROVE ITS PERFORMANCE?


HelpfulCare

The chair of HelpfulCare is elected every year by the board following the annual general meeting. Their appointment is at the discretion of the board.

The nominations committee oversees a formal induction process for new directors. This involves a dedicated training program accompanied by specific information about the organisation’s governance such as the constitution and board handbook. As part of this process, directors meet with the chair and the CEO, and are provided with opportunities for further meetings as required.

The board has a budget for learning and development and all directors are required to assess their training needs every year and undertake any identified training with the approval of the board.

The board engages an external consultant to undertake an annual board review and its individual directors, and the chair receive 360-degree appraisals every two years. This process provides management with the opportunity to provide feedback about the board, which is reviewed by the governance committee and summarised for the board with reccomendations for development.

The chair meets regularly with the CEO and works closely with them on the development of the agenda and board papers. Board papers must be approved by the chair before they are circulated to directors. They must be circulated two weeks prior to a scheduled meeting. The board meets eight times a year for a half day meeting.

The Friendlies

The president of the Friendlies is directly elected by the members every two years. The immediate past president remains a member of the Friendlies’ board for one year to support the incoming chair and to mentor new directors at the board’s discretion.

New directors are provided with relevant governance policies as well as copies of recent board papers. Every second meeting a board member prepares and presents on a topic relevant to the meeting as part of a self-directed training program, and every two years the board receives a formal refresher session on their directors’ duties from a community legal service.

Every two years the board establishes an ad hoc committee to undertake a board review. They design and deliver a survey and report the results to board members. As part of the review they ask questions about the performance of the chair, and individual directors are given the opportunity to self-evaluate and compare this evaluation against their peers in an anonymous way.

The chair and the coordinator meet regularly and always in the week before the board meeting to develop the agenda and to review any reports that go to the board. Directors often contribute to the development of board papers.

CASE STUDIES


Risk managementPRINCIPLE 5

Board decision-making is informed by an understanding of risk and how it is managed

5.1 The board oversees a risk management framework that aligns to the purpose and strategy

5.2 Directors seek and are provided with information about risk and how it is managed

5.3 The board periodically reviews the risk management framework



Risk is inherent in all human endeavours – including in

the activities of organisations. The role of the board is to

understand the organisation’s risk, to make decisions based

on this understanding and to oversee a framework that

manages risk on an ongoing basis. Risk is not something to

be avoided, but to be understood and leveraged in pursuit

of an organisation’s purpose.

“The best laid schemes of mice and men Go often awry.”

Robert Burns, To a Mouse, 1785

What is risk?

The International Organisation for Standardisation (ISO)

defines risk as “the effect of uncertainty on objectives”

(AS/NZS ISO 3100 Risk management). This is a useful

definition as it helps to explain why risk is important

to governance – it must be understood and considered

in decision-making so that the organisation achieves its

purpose with an acceptable degree of certainty.

Importantly, risk is not inherently bad. It arises because

the future is unknowable and therefore the outcomes of

decisions are always uncertain to some extent.

Risk is typically characterised by considering examples of

events that could occur, their likelihood and the consequence

of their impact. These examples are colloquially called ‘risks’.

For example, hypothetical risks could be that a building

burns down or that a funding contract is not renewed. It is

important to note that these are only illustrations that help

to understand risk and are only relevant in the context of the

making of a particular decision.

It is easy to confuse these example ‘risks’ with ‘risk.’

Risk refers to the uncertainty that is inherent in all

decisions because they must be made on the basis of

certain assumptions.

All decisions are based on assumptions about:

• Internal factors (such as structure, staff skills and

resource availability);

• External factors (such as the regulatory environment,

funding availability, interest rates); and

• Wider factors (such as political changes, public sentiment

about donations, or climate change).

What is a risk management framework?

The way that organisations take uncertainty into account

when they make decisions is called ‘risk management.’ The

goal of risk management is to increase the certainty that a

decision’s intended outcome will be achieved. It involves

the identification, evaluation and prioritisation of risks.

Risk management should not be considered as a discrete

activity. Rather, it should be embedded in the practices,

processes and policies within an organisation that are

concerned with making decisions and ensuring that these

decisions continue to be valid.

Risk management happens in all organisations because

people consider, to some extent, what they need to do to

make sure their decisions achieve their intended outcome.

This approach may be ad hoc and inconsistent across the

organisation, but it is always happening.

However, organisations can adopt more formal processes

to facilitate better management of risk. This is called

developing a risk management framework.

The Australian/New Zealand Standard on Risk

management defines a risk management framework as:

AS/NZS ISO 31000:2009 RISK MANAGEMENT – PRINCIPLES AND GUIDANCE

A risk management framework is a set of components

that provide the foundations and organisational

arrangements for designing, implementing,

monitoring, reviewing and continually improving risk

management throughout the organisation.

There is no one-size-fits-all approach to developing a risk

management framework. Large organisations may have

highly-developed approaches, systems and processes which

are supported by both internal and external professional

advisers. Smaller organisations facing simpler decisions

may adopt more informal approaches, relying on their own

experience, judgement and common sense to manage risk.

Benefits of risk management

The purpose of risk management is to support more

informed decision-making. When a decision is made

based on an understanding of risk and how it is managed,

the chances that it will contribute to achieving the


organisation’s purpose will improve. Ultimately, risk

management aims to increase the certainty that an

organisation’s purpose will be achieved.

Risk management enables the organisation to:

• Challenge assumptions in decision-making;

• Take actions that will increase the likelihood that a

desired outcome will be achieved;

• Identify early signs that an undesirable event may occur

and take pre-emptive action to address it;

• Learn from successes and failures in a way that improves

decision-making over time; and

• Consider whether previous decisions remain valid and, if

necessary, revise them.

The board’s role in risk management

The board’s role is to oversee a framework that manages

risk as an integral part of the decision-making process both

at the board level and throughout the organisation.

Risk management is not a separate activity of the board.

While the board may contribute to identifying risks, it can

be a distraction for boards to spend time reviewing lists

of hypothetical risks and the steps that might be taken to

prevent them.

When the board makes a decision, they should ask

management what actions they will take so that the

intended outcomes of the decision will be achieved

with an acceptable level of certainty. The steps taken by

management to identify and control the uncertain elements

of implementation is part of risk management. Boards

should be satisfied that these steps are sufficient and in

alignment with their expectations.

The board should also monitor the outcomes of decisions

they make. Where the context for decisions changes or the

assumptions on which they are made become invalid, the

board may seek to alter these decisions or take new actions

so that the desired outcomes remain sufficiently certain.

Reviewing the risk management framework

The board should periodically review how well the

organisation is managing risk as part of decision-making.

This should involve reviewing the risk management

framework that enables this to occur.

How a review is undertaken, by whom and with what

frequency will depend on the nature of the organisation and

its circumstances. For example, if an organisation has been

subject to significant change, it may require a more thorough

or frequent review of its risk management framework.

In undertaking a review of the risk management

framework, directors should ask:

? Is there clarity about how risk is managed in the organisation?

?Is the risk management framework appropriate for the decisions the organisation faces?

? How effectively has risk management been applied to past decisions?

Responding to risk

It is important to note that the purpose of risk

management is not to minimise or eliminate risk. This

approach can seriously undermine an organisation’s

ability to achieve its purpose. There are several different

approaches an organisation can take in responding to risk:

• Avoidance – an organisation can avoid risks by

discontinuing the activity that generates the risk;

• Treatment – taking steps to control either the likelihood,

or the consequence of the risk if it occurs;

• Transference – passing the risk on to another party such

as outsourcing the activity or acquiring insurance; and

• Acceptance – accepting that a risk may eventuate and

putting plans in place to respond if does.

Risk appetite

One of the most important roles of the board in risk

management is in developing an understanding about

the nature and the extent of risk the organisation is

prepared to accept in pursuit of its purpose. This is often

called defining a ‘risk appetite.’ The risk appetite provides

parameters within which management can pursue the

organisation’s purpose.

It is critical that the organisation’s risk appetite is aligned

with its purpose. If an organisation is not prepared to

accept enough risk, it may be inefficient in pursuing its

purpose; if it accepts too much risk it may be exposed to

undesirable consequences that undermine its performance.


Defining and documenting the organisation’s appetite

for risk supports the development of an appropriate

risk culture which aligns to and supports the purpose

and strategy. Boards must be careful that they are not

so concerned with negative risk that opportunities are

missed, but they can also not have such a disregard for

risk as to expose the organisation to serious harm. Striking

an effective balance between the two is the hallmark of a

sound risk appetite. The board’s role in culture is discussed

in greater detail in Principle 10: Culture.

Risk management committee

Many organisations will establish a committee to assist the

board in exercising due care, diligence and skill in relation

to risk management. In smaller organisations it is common

for the risk management committee to be combined with

other committee functions such as the audit committee.

Objectives for a risk management committee may include:

• Advising the board on the effectiveness of the risk

management framework;

• Supporting provision of accurate, relevant and timely

information about risk;

• Examining previous decisions to see how risk was

managed as part of making those decisions;

• Monitoring and reviewing safety systems throughout the

organisation;

• Oversight of insurance programs to maintain appropriate

coverage;

• Monitoring the organisation’s business continuity

processes; and

• Developing and maintaining an appropriate risk culture

that is embedded through the organisation.

In larger and more complex organisations, staff involved in

the management of risk may also be involved with or have

reporting lines to the risk management committee.


"Boards must be careful that they are not so concerned with negative risk that opportunities are missed, but they can also not have such a disregard for risk as to expose the organisation to serious harm. Striking an effective balance between the two is the hallmark of a sound risk appetite.”



IS THE BOARD AWARE OF HOW RISK IS MANAGED IN THE ORGANISATION?

IS THERE A SHARED UNDERSTANDING OF THE ORGANISATION’S RISK APPETITE?

HOW OFTEN SHOULD THE BOARD UNDERTAKE A REVIEW OF THE RISK MANAGEMENT FRAMEWORK?

IS THE RISK MANAGEMENT FRAMEWORK ALIGNED TO THE ORGANISATION’S PURPOSE?

DOES THE BOARD HAVE ACCESS TO EXTERNAL PROFESSIONAL ADVICE ON RISK MANAGEMENT?


HelpfulCare

In making or reviewing decisions, the board of HelpfulCare regularly questions management about how risk has been understood and responded to. The consideration of uncertainty is part of its formal decision-making processes.

The board has also established a risk management committee whose purpose is to assist the board with its oversight responsibility. The risk management committee reviews decisions made by the board to consider whether risk has been properly considered, and there is a sufficient degree of certainty of achieving the desired outcome.

At their annual strategy day, the board and management test the objectives of the strategic plan to understand the uncertainties that could affect the achievement of their goals. If there is not sufficient certainty, objectives are adjusted to make their outcomes more certain or other, ancillary actions agreed upon (to help increase the level of certainty).

The board of HelpfulCare engage the services of external consultants to undertake an annual review of their framework for managing risk. The risk management committee works with the consultants to agree actions that should be taken to enhance the effectiveness of risk management in the organisation.

The Friendlies

The Friendlies manage risk as an integral part of decision-making. Their directors examine the assumptions involved about uncertainty in the internal and external environment as part of their decision-making process.

The board works to make sure that their decisions remain relevant and that the desired outcomes continue to be sufficiently certain. To do this they receive and consider reports on:

• Whether the implementation of their decisions proceeded as intended;

• Whether any ancillary actions were also properly implemented; and

• Whether changes in the operational context have affected or could affect the outcome of their decisions.

In response to these reports, the board sometimes adjusts their decisions or authorises ancillary action to make sure their goals are achieved with sufficient certainty.

Every two years an ad hoc committee of the board of the Friendlies formally reviews how risk has been managed as part of past decision-making. Where there is adequate documentation past decisions are examined using the criteria above.

CASE STUDIES


PerformancePRINCIPLE 6

The organisation uses its resources appropriately and evaluates its performance

6.1 The board oversees appropriate use of the organisation’s resources

6.2 The board approves an annual budget for the organisation

6.3 The board receives and considers measures which evaluate performance against the strategy

6.4 The board oversees the performance of the CEO

6.5 The board monitors the solvency of the organisation



For an organisation to pursue its purpose it must set clear

goals and timeframes within which they are to be achieved

and measure its progress in achieving them. The board

must work with organisation’s staff, if any, to identify

these goals, make resources available to achieve them and

oversee the appropriate use of these resources.

Oversight of resources

Resources are the tools that organisations use to achieve

their goals. Resources can generally be grouped under four

categories:

• Financial (such as cash reserves, credit and investments);

• Physical (such as real estate, equipment and vehicles);

• Human (such as employees, volunteers and their skills);

and

• Intellectual (such as copyrights, brands and data).

Directors have an important role to play in overseeing the

proper use of these resources. The board must understand

what resources the organisation has access to and

make them available, with appropriate controls, for the

achievement of the organisation’s goals.

!NFPs have a special obligation under the law to only apply their resources for their purpose and not for the private benefit of the people involved with the organisation.

It is common for boards to oversee the development of

policies that set out how resources must be properly used

and maintained. For example, most boards will establish

a policy about who can spend the organisation’s financial

resources and under what circumstances they can be

spent. It is common for organisations to establish policies

concerning appropriate use of technology, management of

intellectual property and human resources.

Beyond focusing on the appropriate use of resources,

boards should also consider whether resources are being

used efficiently. One of the key ways the board does this

is through defining performance targets, often called key

performance indicators (KPIs). These targets help the

board to monitor progress against defined measures, which

should be aligned to the organisation’s goals.

Budgeting

Budgeting is an important annual process that helps

organisations to identify and plan for future needs, and to

allocate resources accordingly. Budgets generally last for a

12-month period and are focused on forecasting revenue

and expenses, though may include consideration of other

resources and measures. It is common for management to

develop the budget and for this to be approved by the board,

but boards may take a more active role in this process in

some circumstances.

The purpose of the budget is to align an organisation’s

resources to its goals and to set parameters around how

resources will be used across a year. For example, the board

may authorise management to spend the organisation’s

financial resources within the budget but may require

approval for any expenditure outside the approved allocations

or above a certain amount.

Boards will generally review the organisation’s performance

against its budget at regular intervals using ‘management

accounts.’ These are internal documents that track

performance against the budget.

Measuring performance

For an organisation to know what it is doing and how its

activities contribute to achieving its purpose, it must define

and evaluate its performance against defined measures. There

are a wide range of performance measures that are used across

the NFP sector. Boards should select a mix of both financial

and non-financial performance measures to help it develop a

more complete picture of the organisation’s performance.

Generally, performance measures should be:

• Meaningful to the organisation;

• Capable of being measured and acted upon;

• Timely;

• Cost effective to produce;

• Comparable; and

• Simple (where possible).

One of the ways the board can align the work of the

organisation to its purpose is through defining performance

measures that support the organisation’s purpose. Defining

and overseeing these measures enables the board to develop

accountability – both in its reporting to external stakeholders

and in holding management to account. This is discussed in

greater detail in Principle 7: Transparency and Accountability.


Performance of the CEO

As part of providing oversight of the CEO, the board

should define and evaluate performance measures for

the CEO which are aligned to the organisation’s purpose

and the strategy. This way the board can keep the CEO

accountable for their performance. Generally, the CEO

will use their own performance measures to inform the

measures for other staff. This helps align the activities of

everyone involved in the organisation with the purpose.

Boards should be careful in the development of these

performance measures. People will naturally orient

themselves to work towards meeting their performance

targets (especially if there is an incentive for doing so) and

so the form these measures take can significantly influence

the way that the people in the organisation behave. This is

discussed in greater detail in Principle 10: Culture.

The board should provide regular and honest feedback

to the CEO on performance including the board’s

expectations. The CEO also has a responsibility to keep

the board informed about progress against performance

measures by providing regular reports. This will help the

board form an opinion about the CEO’s performance and

inform the feedback they provide.

Financial information

Directors are required to read and understand financial

information so they can play their part in monitoring the

organisation’s financial health and performance. This is

part of the duty of directors to act with care and diligence

which is discussed in greater detail in Principle 2: Roles and

responsibilities.

Importantly, every director has a responsibility to

understand the organisation’s finances and to contribute to

appropriate financial oversight. This is not the sole remit of

the treasurer, nor can this responsibility be outsourced to

an organisation’s accountants or external advisers.

The board should work with management to determine

how best to communicate information about the

organisation’s financial position. Information produced for

this purpose is referred to as ‘management accounts.’

Management accounts usually include the following three

types of financial statements:

Figure 5: Types of financial statements

Balance sheet

This statement shows the organisation’s assets (the things the organisation owns such as cash and property), liabilities (the things the organisation owes such as debts and provisions) and equity (the organisation’s net worth) at a point in time.

Statement of profit and loss

This statement shows how much money an entity has earnt during the period, generally on monthly or yearly terms. The statement shows revenue minus expenses, revealing the profit and loss for the period.

Cash flow statement

This statement shows the movement of cash in and out of the organisation under categories of operating, investing and financing activities to show a net change in cash for the period.

!Where a financial report is presented to members and other stakeholders, laws and regulations may require them to be presented in accordance with Australian Accounting Standards.

The numbers in these statements are intrinsically linked.

Organisations can make use of accounting software that

links the data in these statements to provide greater

integrity in financial reporting, but directors should

carefully review whether these statements are correct.

Together, these three financial reports present the

overall picture of the organisation’s financial health at

a point in time.

Financial health

Evaluating the organisation’s financial health is an

important part of the role of the board.

In doing so, the board must identify what the financial

goals of the organisation are. This includes determining

matters such as the required level of reserves, an

appropriate diversity of revenue streams and the right

asset mix to maintain. Boards will generally look closely at

their budget, management accounts and financial reports to

evaluate performance against these goals.


There are several standard indicators that organisations can

use to assess financial performance:

Figure 6: Examples of financial performance measures

Performance category Possible indicators

Program efficiency Ratio of program expenses to program commitment

Ratio of program expenses to total expenses

Fundraising efficiency Ratio of fundraising expenses to funds obtained

Ratio of fundraising to total expenses

Grant efficiency Ratio of grant submissions to grants obtained

Ratio of grants to total expenses

General financial indicators

Revenue growth

Working capital ratio

Return on equity

Return on assets

!Being an NFP does not mean that you cannot make a profit (sometimes called a ‘surplus’). NFPs can make a profit provided it is used to further its purpose.

There is a perception among some NFPs that they should not

set and achieve ambitious profit goals because this may be

viewed poorly by stakeholders. However, aiming to achieve

long-term financial sustainability should be a core goal of all

organisations so that they can achieve their purpose now and

into the future. This involves making smart financial decisions

and aiming not only to get by, but to build and maintain

financial strength.

“Profit is not a dirty word.”Susan Pascoe AM FAICD

Inaugural Commissioner of the Australian Charities and Not-for-profits Commission. Launch of the 2017 AICD

NFP Governance and Performance Study

While it is important to plan for financial strength, NFPs

should not pursue profit at the expense of delivering their

purpose or be perceived to be doing so by stakeholders.

Boards play an important role in determining a financial vision

for the organisation and communicating it to stakeholders.

For example, if an NFP is seeking donations while at

the same time making a large profit so that it can pay

for a new piece of equipment, it is important that this

is understood by stakeholders. The board should make

sure that the intention of their financial decisions is

communicated to members so that they can understand how

the organisation’s resources are being used to further the

organisation’s purpose.

This also applies to an organisation’s reserves. Having

adequate reserves is important to support financial

health and can play an important role in managing risk.

Determining the right level of reserves is a matter for the

board and should include consideration of the organisation’s

operational context (such as its operations, staffing, funding

landscape, liabilities and the external market) to help assess

current and future financial needs.

It is important that the board takes a considered approach to

the management of its reserves. It is a good idea to develop

a policy that sets out the board’s intentions around the

maintenance and use of reserves. This policy can also help

the board to communicate with stakeholders about how

they are managing the organisation’s financial resources.

Monitoring solvency

Solvency refers to an organisation’s ability to pay its debts

as and when they are due. This means that an organisation

must have access to enough cash (or assets that can be

quickly converted to cash) to pay for any debts it may have.

Monitoring solvency is a key responsibility of each director.

One of the ways a board can do this is by monitoring the

organisation’s cash flow. If more money is consistently

going out than is coming in, this may be an indication that

the organisation is heading towards insolvency. Estimating

future cash flow needs and monitoring the working

capital ratio (which shows the relative proportion of the

organisation’s current assets to its current liabilities) can

also provide insight into an organisation’s solvency. It is

generally considered good practice for an NFP to have a

working capital ratio of 1.5 or greater, meaning that current

assets should be 1.5 times greater than current liabilities.

Where this is not the case, this should be prompt inquries

from directors.

!Most organisations will be subject to legal requirements about being and remaining solvent. Directors may be personally liable for any debts incurred if an organisation continues to trade after it becomes insolvent.


Faced with the prospect of insolvency, many boards choose

to shut up shop and call in an administrator or liquidator.

However, directors may be able to rely on a ‘safe harbour’

defence if they begin a course of action that is reasonably

likely to lead to a better outcome for the organisation than

the appointment of an administrator or liquidator.

Insolvency is a complex and serious issue, and directors

should take swift action if they are concerned that the

organisation is, or may become, insolvent. Often this will

include seeking expert, professional advice.

Non-financial performance

The performance of an NFP should not be evaluated in

financial terms alone. To build a complete picture of an

NFP’s performance, it is also important to use non-financial

performance measures.

For example, an organisation established with the purpose

of providing high-quality care and accommodation to

older Australians cannot know whether it is achieving its

purpose solely by looking at its profit for the year. It will

be relevant to evaluate factors such as standards of clinical

care and the health and wellbeing outcomes of clients.

These are called non-financial performance measures.


use to assess non-financial performance:

Figure 7: Examples of non-financial performance measures


Inputs Number of staff or volunteer hours

Number of staff or volunteers

Number of donations of goods

Outputs Number of sessions held (financial counselling service)

Number of plays staged (community theatre)

Increase in membership (community association)

Efficiency Cost per bed (aged care facility)

Cost of recruitment per member (professional association)

Cost of class per student (school)

Effectiveness Client satisfaction

Brand recognition

Quality of clinical care (hospital)

Efficiency measures demonstrate how well an organisation

turns its inputs (e.g. financial resources) into outputs (e.g.

meals). For example, a soup kitchen can determine the

efficiency of its operations by calculating the number of

meals it provides and the total cost of providing them to

work out the cost of each meal.

Effectiveness measures demonstrate how well an

organisation is achieving its objectives. These measures can

be more difficult to determine because they are generally

not as easy to quantify and may involve more subjective

judgement. For example, a school might evaluate its

effectiveness based on how well students perform against

standardised tests. These measures are sometimes referred

to as ‘outcomes measures.’

In selecting non-financial performance measures, it

is a good idea to consider a balance of efficiency and

effectiveness measures to establish a more complete picture

of performance.

!Some organisations may have legal or contractual obligations to report on certain measures as part of funding, contractual, regulatory or accreditation requirements.

It is also important for organisations to assess how well

they are performing against the expectations for their

conduct (or behaviour) set by themselves and others such

as government authorities, accreditation bodies and self-

regulatory agencies. This is discussed in greater detail in

Principle 9: Conduct and compliance.

Measuring impact

All NFPs exist for a purpose, but it can be challenging to

evaluate precisely how well an NFP is working towards

achieving its purpose. Some NFPs will have a purpose that

is very difficult to evaluate such as eradicating poverty, or

which may be ongoing such as cancer research.

Impact measurement refers to the process of evaluating

how much change an organisation has achieved through

its activities. For example, an organisation that provides

employment services to deaf people might measure impact

based on factors such as the workforce participation of

their clients. To do this, an organisation might compare

their clients against the broader workforce, against a

control group of deaf people who are not their clients, or

against the impact of their competitors.


Measuring impact is challenging and may require

significant resources to do effectively. However, if possible,

impact measurement is a valuable way to demonstrate an

organisation’s success in achieving their purpose, and can

be useful in attracting donations and funding.

Reporting to the board

For the board to monitor the organisation’s performance,

and to make decisions that will help drive performance,

they must have access to timely and relevant information.

The main way this is achieved is through reporting to the

board. Reports received by the board should be aligned

to the strategy and include consideration of any defined

performance measures.

The nature of this reporting will depend on the

organisation’s circumstances. The board should work with

management to establish a reporting framework that

provides access to the information they need, when they

need it and in an appropriate format.

While it is important this information is provided to the

board, directors should also actively seek more information

if required as part of their duty of care and diligence. This

is discussed in greater detail in Principle 2: Roles

and responsibilities.


"Measuring impact is challenging and may require significant resources to do effectively. However, if possible, impact measurement is a valuable way to demonstrate an organisation’s success in achieving their purpose and can be useful in attracting donations and funding.”



IS THE BOARD SATISFIED THAT THE ORGANISATION’S RESOURCES ARE PROTECTED FROM MISUSE?

IS THERE AN AGREED DEFINITION OF SUCCESS FOR THIS ORGANISATION?

HOW WELL IS FINANCIAL AND NON-FINANCIAL PERFORMANCE EVALUATED?

DO FINANCIAL PERFORMANCE TARGETS CONTRIBUTE TO LONG-TERM ORGANISATIONAL SUSTAINABILITY?

HOW DOES THE BOARD USE PERFORMANCE INFORMATION IN ITS DECISION-MAKING?


HelpfulCare

HelpfulCare has established a resource management framework that sets out how the organisation’s resources are to be used. As part of this they have developed specific policies around matters such as vehicle maintenance and acceptable use of technology.

The board undertakes an annual budgeting process which sets ambitious targets for profit and growth. HelpfulCare uses a zero-based budgeting model through which all expenses are justified for each new period and a revised budget is developed at the half-year mark in response to changes in the operational environment.

As part of their strategic plan, HelpfulCare have identified five key strategic goals which are supported

by a series of measures. The board receives regular reports from management on the organisation’s performance against these measures.

The board also receives regular financial reports which help them to monitor and reach an informed opinion on the organisation’s financial health – including its solvency. Financial reports are prepared by management and reviewed by the board.

The board sets short, medium and long-term objectives for the CEO which are defined in an annual performance agreement. The CEO receives an annual appraisal as part of a process lead by the chair and reports at quarterly intervals to the board against defined criteria.

The Friendlies

The Friendlies maintain an annual budget which is developed by the board with the assistance of the coordinator. The budget remains substantively the same each year but is adjusted based on new membership figures or to accommodate specific projects.

Within the budget, only the coordinator is authorised to spend money on behalf of the Friendlies. For expenditure outside the approved budget or above a certain amount, the coordinator is required to seek the authority of the board.

The Friendlies have a five-year strategic plan which includes key targets towards which the organisation

is working including growing their membership and saving money for community projects. Reports against these targets are provided by the coordinator at all board meetings. The board also reviews standard management accounts produced by the Friendlies’ accounting software to consider how they are performing against their budget and to monitor solvency.

The coordinator’s goals are the same as the organisation’s strategic objectives. Every year the chair and two board members meet to review the coordinator’s performance and to provide feedback.

CASE STUDIES


Transparency and accountabilityPRINCIPLE 7

The board demonstrates accountability by providing information to stakeholders about the organisation and its performance

7.1 The organisation’s governing documents and policies relevant to its governance are available to stakeholders

7.2 The board oversees appropriate reporting to stakeholders about the organisation’s performance and financial position

7.3 Transactions between related parties, if any, are disclosed to stakeholders

7.4 Directors’ remuneration and other benefits, if any, are disclosed to stakeholders

7.5 Members have the opportunity to ask questions about how the organisation is run and to hold the board to account for their decisions



The board has ultimate authority for the organisation

and as such has ultimate accountability for its activities

and performance. This means they must present a fair

representation of the organisation’s activity and take

responsibility for the consequences of their actions and their

and the organisation’s performance.

What is accountability?

Accountability exists in a relationship between two parties

where one has expectations of the other, and the other is

obliged to provide information about how they have met

these expectations or face the consequences of failing to

do so.

There are two components of accountability:

• Answerability – which means providing information and

justification for how one’s actions align with expectations;

and

• Enforcement – which means being subject to, and accepting

the consequences of, failing to meet these expectations.

Because accountability in an organisation will involve

multiple parties, it is important there is clarity about who is

accountable to whom and how. The way this accountability

is achieved will generally be set out in an organisation’s

governing documents, such as its constitution, and any laws

that apply to it. For example, an NFP may be required to

provide an annual financial report to its regulator and the

penalty for failing to do this may be a fine.

It is important that the documents and policies that enable

accountability are made available to relevant stakeholders.

Subject to necessary confidentiality, usually this is done by

providing such information on the organisation’s website, but

it should be available on request at a minimum.

For accountability to be achieved, there must be transparency.

What is transparency?

Organisations are transparent when they enable others

to see and understand how they operate in an honest

way. To achieve transparency, an organisation must

provide information about its activities and governance to

stakeholders that is accurate, complete and made available in

a timely way.

Transparency enables accountability.

This does not mean all information should be made publicly

available. There are certain types of information that may

not be provided publicly such as private information (such as

client records) and ‘commercial in confidence’ material (such

as tender submissions).

To whom are boards accountable?

The board is entrusted by its members to govern on their

behalf. As a result, the primary accountability of boards is to

their members.

There are several ways that boards can demonstrate

accountability to their members. For example, by answering

members’ questions at general meetings and holding open

and fair elections for board members. One of the ways boards

are held accountable is through upholding their duties which

are discussed in Principle 2: Board roles and responsibilities.

Boards may also be accountable to other sources including:

• Regulators, police and the courts;

• Government and non-government accreditation bodies;

• Clients and customers;

• Financial institutions such as banks;

• Funders and government departments through funding and

service agreements; and

• Other individuals and organisations through contracts for

service or employment.

It is important that boards understand to whom they are

accountable and that they are satisfied they are meeting any

obligations they have to them.

Annual reporting

One of the ways an organisation can demonstrate

accountability to stakeholders is through publishing an

annual report. An annual report is a document that includes

governance and performance information about the

organisation in a certain reporting period such as:

• Information about the organisation’s purpose, vision, values

and strategic goals;

• Statements from the organisation’s leaders such as its CEO

and chair;

• Profiles of directors and information about the

organisational structure;

• Information about key organisational resources (such as

staff and volunteers); and

• Information about the organisation’s activities within

the reporting period, including key statistics and

performance data.


!

An organisation’s governing documents and any laws that apply to it may set out requirements in relation to publishing annual reports such as what it must include, to whom it must be provided and within what timeframe.

Annual reports are also a valuable way for organisations

to connect with their stakeholders. Many organisations

use their annual reports as a way of demonstrating their

achievements during the year to help stakeholders,

particularly donors and volunteers, to understand how their

contributions assisted in achieving the organisation’s goals.

An annual report may contain the organisation’s financial

report or an extract.

Financial reporting

Many NFP organisations are required to produce a financial

report and provide this to their members, funders or to

lodge it on a public register.

!

An organisation’s governing documents and any laws that apply to it may set out requirements around the presentation of financial reports including what form they take and to whom they must be provided and within what timeframe.

Many organisations are required to prepare their financial

reports in accordance with Australian Accounting

Standards. These standards are developed, issued and

maintained by the Australian Accounting Standards Board

(AASB) and set out the rules for the preparation and

presentation financial statements.

To determine whether an organisation is required to apply

with Australian Accounting Standards, directors will

need to assess whether their organisation is a ‘reporting

entity’. The definition of a reporting entity is set out under

Australian Accounting Standards.

STATEMENT OF ACCOUNTING CONCEPT 1: DEFINITION OF REPORTING ENTITY

Reporting entities are all entities (including economic

entities) in respect of which it is reasonable to expect

the existence of users dependent on general purpose

financial reports for information which will be useful

to them for making and evaluating decisions about

the allocation of scarce resources.

Generally, if people use and rely on an organisation’s

financial statements to help them make decisions (for

example, about how to spend money) and they can’t

command the organisation to provide this information, it

will be considered a reporting entity.

Reporting entities must produce ‘general purpose financial

reports’. The definition of general purpose financial reports

is set out under Australian Accounting Standards.

STATEMENT OF ACCOUNTING CONCEPT 1: DEFINITION OF REPORTING ENTITY

“General purpose financial report” is a financial

report intended to meet the information needs

common to users who are unable to command the

preparation of reports tailored so as to satisfy,

specifically, all of their information needs.

General purpose financial reports must comply with all

Australian Accounting Standards.

Organisations that are not reporting entities may choose

to produce ‘special purpose financial reports’. These are

a type of financial report that do not have to comply

with all Australian Accounting Standards and which are

prepared for the benefit of particular users. However, the

users of these reports may require that they comply with

certain Australian Accounting Standards. For example,

organisations that are registered charities must comply

with six minimum accounting standards.

It may be necessary for a financial report to be audited or

reviewed depending on the requirements of regulators,

funding providers or the organisation’s governing

documents and any laws that apply to it.


!An organisation’s governing documents and any laws that apply to it may set out requirements around who must approve the organisation’s financial reports. Often this will be the directors.

General meetings

Many organisations hold an annual general meeting (AGM)

which provides an opportunity for members and other

stakeholders to gather, hear about the

organisation’s activities and finances for the previous year,

and ask questions.

AGMs also provide an opportunity to undertake important

governance activities that can only be done at general

meetings of members such as electing board members and

making changes to an organisation’s governing documents.

Generally, these activities will be undertaken through a

vote of the members and it is important to make sure that

any relevant procedures in relation to voting are followed.

!

An organisation’s governing documents and any laws that apply to it may set out requirements around holding AGMs such as regarding notice periods, the content of the notice, who has to be invited and any business that needs to be discussed.

Sometimes it is necessary to gather members more often

than once a year and so the board may call an additional

meeting of members. These meetings are sometimes called

special general meetings (SGM). An SGM might be called to

deal with an item of business that cannot wait for an AGM

such as authorising a merger or winding up the organisation.

It is important to follow any procedures relevant to holding

an SGM which will generally be set out in an organisation’s

governing documents and any laws that apply to it.

Disclosing related party transactions

It is not uncommon for NFP organisations, particularly

smaller NFPs, to undertake transactions with people who

are closely related to it. For example, a director might offer

a discounted service to the organisation or their child might

buy a used car from it. These transactions are called ‘related

party transactions’.

Because related party transactions occur between the

organisation and someone closely associated with it,

they must be carefully managed so that they meet any

obligations under the law, including any requirements to

disclose them.

!Organisations that are required to lodge general purpose financial statements must comply with the Australian Accounting Standard on related party transactions (AASB 124: Related Party Disclosures).

Regardless of whether an organisation is required to lodge

general purpose financial statements, it is a good idea to

disclose related party transactions to promote transparency.

The definition of ‘related parties’ is set out in AASB 124

Related Party Disclosures and includes people such as the

directors, the CEO, and other senior staff. It also includes the

members of these peoples’ close family that have control,

joint control or significant influence over the organisation.

AASB 124 Related Party Disclosures also defines ‘related

party transactions’:

RELATED PARTY TRANSACTIONS

A transfer of resources, services or obligations

between a reporting entity and a related party,

regardless of whether a price is charged.

Related party transactions may include:

• Purchases or sales of goods or property;

• Donations made or received;

• Rendering or receiving of services; and

• Receiving or providing loans.

It is a good idea to develop a policy on related party

transactions that sets out how they will be disclosed and

managed. These policies also help promote transparency,

and the proper and accountable use of resources.

Disclosing remuneration and other benefits

Most directors in the NFP sector are not paid (remunerated)

for their work as a director. However, where directors do

receive remuneration for their work, it is a good idea that

this remuneration is disclosed to stakeholders.

Where remuneration is paid, there are several ways disclosure

can be made, the most straightforward of which is to list

directors by name and report their respective remuneration.

The example below demonstrates how this can be done for

a fictional organisation:


Figure 8: Example director remuneration disclosure

Rem

uner

atio

n

Supe

rann

uati

on

Tota

l re

mun

erat

ion

Chairperson

Giulia Bianchi

$6,000 $540 $6,540

Directors

Fei Zhen $4,500 $405 $4,905

Patricia Parsons

$4,500 $405 $4,905

Joko Prasetyo

$4,500 $405 $4,905

TOTALS $19,500 $1,755 $21,255

This disclosure should include any other benefits that

directors receive as payment for their work. For example,

if directors are given cars as part of their payment, the cost

of this benefit should be included in the disclosure.

An organisation’s governing documents may also set out

requirements around the payment of directors such as

requiring the approval of members. It is a good idea to

develop a policy on how remuneration is determined and

approved.

NFPs that are required to comply with AASB 124: Related

Party Transactions must disclose an aggregate figure for

the remuneration of ‘key management personnel’ in their

annual financial report.

The definition of key management personnel is set out

under AASB 124: Related Party Transactions:

KEY MANAGEMENT PERSONNEL

Those persons having authority and responsibility

for planning, directing and controlling the activities

of the entity, directly or indirectly, including any

director (whether executive or otherwise) of that

entity

This definition includes directors and will also generally

include the CEO and other senior staff such as the chief

financial officer and the chief operating officer.

The example below demonstrates how this can be done for

a fictional organisation:

Figure 9: Example key management personnel remuneration disclosure

2018 2017

Compensation by category $’000 $’000

Short-term employee benefits

493 422

Post-employment benefits

26 24

Other long-term employee benefits

55 49

Termination benefits 0 0

TOTALS 574 495

Organisations that are not required to produce general

purpose financial reports may still choose to disclose the

remuneration of their key management personnel on a

voluntary basis.



TO WHOM IS THIS ORGANISATION ACCOUNTABLE?

WHAT INFORMATION DO STAKEHOLDERS/MEMBERS NEED TO HOLD THE BOARD TO ACCOUNT?

HOW IS REPORTING ALIGNED TO STAKEHOLDER/MEMBER NEEDS?

HOW CAN MEMBERS HOLD THE BOARD TO ACCOUNT FOR ITS DECISIONS?

WHAT ARE THE CONSEQUENCES FOR FAILING TO MEET MEMBER/STAKEHOLDER EXPECTATIONS?


HelpfulCare

HelpfulCare provides an annual report to its members that sets out in detail how the organisation worked throughout the year and how it performed against its strategic objectives. The annual report includes an extract of their financial report and a full version of this is available on their website.

To keep their stakeholders informed about their activity, HelpfulCare uses a number of communications tools such as a magazine, email bulletins, a blog and social media.

Each year, HelpfulCare holds an AGM to which they invite their members and key stakeholders. At the AGM, directors and senior staff provide presentations on the key achievements for the year and invite questions from members.

The directors of HelpfulCare are each paid a small honorarium for their service and this is disclosed in their annual report. Directors receive $100 per meeting to cover the cost of their travel and expenses. The annual report also lists any related party transactions made during the year.

The Friendlies

Keeping their membership actively engaged is a key focus for the Friendlies. They do this through producing a monthly email newsletter where they focus on their recent activities and share stories about how their work has made a difference.

Members are also invited to attend quarterly ‘town hall’ meetings where they can hear verbal reports of the Friendlies’ recent activities and ask any questions about their operations. Once a year, the town hall meeting includes an annual general meeting which includes the presentation of financial statements.

The Friendlies do not have a website and only use social media and email to engage with their membership. As a result, their governing documents are not available online, but they provide these documents to members on request and a copy is given to all new members.

The Friendlies do not pay their directors and this is widely known by stakeholders. They maintain a policy on related party transactions that requires directors to disclose any such transactions at one of their town hall meetings.

CASE STUDIES


Stakeholder engagementPRINCIPLE 8

There is meaningful engagement of stakeholders and their interests are understood and considered by the board

8.1 The board understands who the organisation’s stakeholders are, their needs and their expectations

8.2 The board oversees a framework for the meaningful engagement of stakeholders

8.3 Stakeholders are considered in relevant board decision-making

8.4 There is a process for gathering and responding to complaints and feedback from stakeholders

8.5 The board oversees a framework for how the organisation works with and protects vulnerable people



To govern effectively, boards must have an awareness of

the stakeholder environment in which they operate and

understand the needs and interests of these stakeholders.

In certain circumstances, boards may also have obligations

under the law about how they work with stakeholders. At the

heart of stakeholder engagement is the acknowledgement that

organisations are impacted by, and have an impact on those

with whom they interact.

Identifying your stakeholders

All organisations have stakeholders, though who these are will

vary based on factors such as the activities an organisation

undertakes and its relationships. Boards should develop an

understanding of who their stakeholders are, what their

relationship to the organisation is, and what responsibilities

the organisation has to them, if any. Often, the most important

stakeholders for an organisation will be the people that the

organisation exists to benefit (its beneficiaries).

Example of stakeholders include:

• Members;

• Suppliers;

• Clients and their families;

• Volunteers;

• Donors;

• Funders;

• Neighbours;

• Staff;

• Government;

• General public;

• Media;

• Carers.

In certain circumstances, directors may have legal obligations

to their stakeholders either directly or through the

organisation. For example, an organisation has a legal duty to

take reasonable care to avoid exposing its workers, including

any volunteers, to reasonably foreseeable risks of injury.

Do directors owe a duty to their stakeholders?

Directors’ duties are generally owed to the organisation as a

whole. That is, directors must act honestly, in good faith and

to the best of their ability in the interests of the organisation.

In practice, this means that a director owes their duties to the

members of the organisation, and not to its other stakeholders.

However, an organisation may be subject to other statutory

requirements (such as work health and safety legislation) that

give rise to duties that directors owe to other stakeholders.

However, directors should consider the views and interests

of stakeholders because they can lead to better and more

balanced decisions in pursuing the organisation’s purpose.

Duties of directors are discussed in greater detail in Principle

2: Roles and responsibilities.

Engaging with stakeholders

Effective stakeholder engagement involves building

relationships based on mutual trust, respect and

understanding. Engagement is not an end in itself, but a

means by which to build and develop relationships which help

organisations to pursue their purpose.

Stakeholder engagement is beneficial both to organisations

and to stakeholders. It provides valuable information

to the organisation (such as about how it is perceived,

its stakeholders’ needs and its broader operational

environment), builds goodwill and helps to identify potential

issues for resolution.

Stakeholders benefit from these relationships too through

helping organisations to better understand their needs and

expectations. This engagement also helps stakeholders to

develop a more informed understanding of the

organisation and how to work with it, and to manage their

expectations accordingly.

The board’s role in stakeholder engagement

An organisation’s relationships with its stakeholders can have

a significant impact on its ability to achieve its goals. As such,

boards should oversee the process of stakeholder engagement

and be satisfied that its stakeholders are identified and

understood. Stakeholder engagement is a critical component

of good governance.

“Corporate Governance is concerned with holding the balance between economic and social goals and between individual and communal goals.

The corporate governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations and society.”

Sir Adrian Cadbury


There are a several practical ways boards can do this.

Boards should consider how stakeholders are impacted

by relevant decisions, having regard to their needs

and expectations, to maximise the chances that their

decisions will lead to the desired outcome. Seen in this

way, considering the influence of stakeholders is part of

risk management which is discussed in greater detail in

Principle 5: Risk management.

Some boards may authorise stakeholder engagement

frameworks which help guide an organisation’s work

through identifying relevant stakeholders and setting the

parameters for how to engage with them.

In some circumstances, directors themselves may become

actively involved in managing relationships. For example,

it is sometimes helpful for the chair or other directors to

attend meetings with politicians in advocacy settings, or to

meet with significant donors on behalf of the organisation.

This can help to build personal relationships and to

reflect the board’s commitment to engaging with

important stakeholders.

Responding to feedback

It is important that organisations have a safe and effective

method for gathering feedback from stakeholders. This

information can be used to inform the delivery of services,

to develop an understanding of how the organisation

is perceived and to identify and respond to potential

concerns. Feedback should be viewed as a positive

interaction between organisations and their stakeholders

which provide an opportunity to learn and improve.

Feedback can be received in many ways; an individual

might make a formal complaint about an organisation

using an established complaint handling system or a

comment may be made through an informal channel such

as social media.

How an organisation gathers and responds to this

feedback can have a significant impact on its performance,

reputation and culture. For example, if an organisation

does not act on feedback or is dismissive of people who

raise concerns, this may impact how it is perceived by

stakeholders and create a culture in which stakeholders are

not valued.

In some circumstances, complaints (especially those which

are repeated or serious) may be an indicator of poor

performance, misconduct or may in some instances be a

breach of the law.

It is a good idea to set out a policy for how the organisation

will respond to complaints and other feedback. This policy

should apply to all paid and volunteer staff and should

include to whom a complaint can be made, how

it will be handled, expected timeframes and a process for

communicating any resolutions.

Boards should aim to develop a culture of disclosure

which recognises that feedback from stakeholders, even

complaints or allegations of wrongdoing, is an important

source of insight that can help an organisation achieve its

mission and avoid misconduct.

Protecting vulnerable people

Many NFPs, because of the nature of their work, will

regularly interact with vulnerable people. However, all

organisations that operate in the community may interact

with vulnerable people and, where they do, it is important

that there are systems and processes in place to protect

them from harm.

The term ‘vulnerable people’ refers to people who are

susceptible to harm or exploitation by reason of age,

illness, trauma, disability or for any other reason.

!Many organisations will be subject to additional legal requirements and obligations in relation to the care of vulnerable people.

Boards play an important role in protecting vulnerable

people such as through overseeing risk management,

compliance with relevant laws and a policy framework that

protects vulnerable people. Perhaps most importantly, the

board must seek to develop and maintain a culture which

prioritises the safety of vulnerable people.



WHO ARE THE STAKEHOLDERS OF THIS ORGANISATION?

HOW ARE THE NEEDS OF STAKEHOLDERS CONSIDERED BY THE ORGANISATION?

HOW DO STAKEHOLDERS PERCEIVE THE ORGANISATION AND WHAT IS THE IMPACT OF THIS?

HOW DOES THE BOARD ACCESS AND RESPOND TO FEEDBACK FROM STAKEHOLDERS?

HOW ARE VULNERABLE PEOPLE PROTECTED BY THIS ORGANISATION?


HelpfulCare

HelpfulCare has developed a comprehensive stakeholder engagement framework that identifies who their stakeholders are, as well as how the organisation understands their needs and expectations. The framework sets out a principles-based approach to stakeholder engagement grounded in respect, participation and transparency.

As part of their formal decision-making process, the board considers how their decisions will impact and may be impacted by stakeholders. To maintain an ongoing connection with stakeholders, board meetings begin with a ‘client story’ which helps directors to focus their minds on how their work impacts stakeholders. Directors also regularly engage with

stakeholders through site visits and by participating in consultative forums.

HelpfulCare actively seeks opportunities to gather feedback from stakeholders and uses mechanisms such as client surveys and market research to develop a more fulsome picture of performance. They have also established policies for responding to compliments and complaints so that feedback is appropriately acted on.

Many of HelpfulCare’s clients are considered to be vulnerable people and they have established robust systems and processes which aim to keep their clients safe. Among these are compliance with relevant clinical care standards and the adoption of the ‘National principles for child safe organisations.’

The Friendlies

The Friendlies are a democratic, community-controlled organisation and stakeholder engagement is central to what they do. Their regular ‘town hall’ style meetings provide an opportunity for stakeholders to gather and to develop a shared vision for how the Friendlies should work.

Stakeholders are also regularly surveyed about their priorities and there are regular votes for members to choose between multiple project opportunities. The board use this information to guide their decision-making and are regularly encouraged by the chair to consider what stakeholders would want.

Complaints to the Friendlies are handled in accordance with their complaints management policy which requires that any formal complaint is reviewed by the board.

The Friendlies have a policy on working with vulnerable people. One part of the policy includes a requirement that all of their volunteers maintain a working with children check and undergo an annual police records check. They also make sure all volunteers are trained in the policy, and that is reviewed annually.

CASE STUDIES


Conduct and compliancePRINCIPLE 9

The expectations of behaviour for the people involved in the organisation are clear and understood

9.1 The board articulates its expectations of conduct, and the consequences for misconduct, for the people involved with the organisation

9.2 The board oversees compliance with relevant laws, regulations and internal policies

9.3 Conflicts of interest are identified, disclosed and managed

9.4 There is a process for investigating misconduct and relevant instances are brought to the attention of the board



For an organisation to work effectively, there must be

clear expectations about how the people involved with

it are expected to behave. Boards play an important role

in defining acceptable behaviours and in establishing

frameworks that enable action when unacceptable

behaviours occur.

Although much can be done through policies and practices

to shape behaviour, one of the most powerful influences

on the behaviour of people involved with an organisation

is culture. For this reason, Principle 9: Conduct and

Compliance is closely linked with Principle 10: Culture.

Codes of conduct

Codes of conduct are policy documents that describe

the behaviours (conduct) expected of the people involved

in an organisation. The board will generally approve the

code of conduct and it will apply to all people involved

in the organisation such as staff, volunteers, members

and directors.

These codes will generally include:

Standards of governance

For example, privacy, disclosure of conflicts of interest, and compliance with internal policies

Standards of behaviour

For example, respect for diversity, use of organisational resources and professional communication

Unacceptable behaviours

For example, prohibiting use of illicit substances, sexual harassment, and bullying

Codes of conduct take many forms; some are highly

prescriptive, prohibiting certain actions or behaviours,

while others are more principles-based. The common

goal of codes of conduct is to provide guidance to the

people involved with an organisation about how they are

expected to behave. For this reason, it is common for codes

of conduct to include a discussion of these expectations,

relevant examples and links to relevant internal policies.

It is important that a code of conduct is enforced. The

consequences for failing to comply with the code of conduct

should be clearly set out, as well as the mechanisms for

how this will be determined and enforced. Boards should be

prepared to make difficult decisions to enforce the code of

conduct and to empower management to do the same.

Complying with the law

All organisations must comply with the law. It is important

that boards understand the legal framework that applies to

their organisation and that they are satisfied with the steps

taken to comply.

The laws that apply to an NFP will depend on the nature of

the organisation. Some laws, such as taxation laws and the

criminal code, apply to all organisations. Other laws may

only apply based on the type of activity the organisation is

undertaking such as the laws around preparing and storing

food or fundraising.

It is generally not possible for a board to know every law

that applies to their organisation in detail or to evaluate

for themselves whether the organisation is complying with

every relevant law. However, there are ways that a board

can oversee compliance with the law, for example, by:

• Seeking independent review of proposed decisions;

• Establishing a policy framework that requires staff to

follow relevant laws;

• Maintaining integrity of internal and external audit

processes;

• Promoting a culture of compliance;

• Seeking independent legal advice where necessary; and

• Establishing robust systems for reporting and

investigating misconduct.

Boards can and should apply a similar approach to

requiring compliance with their governing documents

and internal policies. Boards may be interested to inquire

into how management maintains compliance with policies

such as through providing regular training, internal

communications or through requiring compliance through

employment contracts.

Conflicts of interest

Directors have a duty to act in the best interest of their

organisation. At times, a director’s personal interests (such

as their investment interests) or their other duties (such as

to another organisation of which they are a director) may

conflict with this duty. This is called a conflict of interest.

Conflicts of interest can also affect other people

involved with the organisation, such as management

and staff, and it is important that these conflicts are also

identified and managed.


There are three types of conflicts of interest:

Figure 10: Types of conflict of interest

Actual Potential Perceived

There is a direct conflict of interest.

For example, you are in a close personal relationship with an employee of the organisation you are a director of.

There could be a conflict of interest.

For example, you are a director of two charities that may both compete for the same grant in the future.

There may appear to be a conflict of interest.

For example, you are an investor in a company that your board may be perceived to be able to influence.

Conflicts of interest can’t always be avoided and do not

necessarily represent a problem. However, it is important

that they are managed properly so that directors are acting

in the best interest of the organisation and to protect the

organisation’s reputation.

The first step to managing conflicts of interest is

identification. Conflicts of interest should be recorded so

that there is transparency about what directors’ interests

are. Many organisations maintain a register of directors’

interests, which records any relevant interests that may give

rise to a conflict now or in the future. This also assists with

appropriate oversight and transparency of these interests.

It is good practice for the chair to invite directors to declare

any conflicts of interest at the beginning of a meeting.

!An organisation’s governing documents and any laws that apply to it may set out requirements about the management and disclosure of conflicts of interest.

Once a conflict has been identified, the board must decide

how it will be managed. For example, it may be required

that the conflicted director:

• Refrain from participating in any discussion about

related matters;

• Remove themselves from the room; or

• Abstain from voting on any matter related to the

conflict.

This is called taking remedial action. The appropriate

remedial action will depend on the nature of the conflict

and boards will need to determine how best to manage

a conflict based on the circumstances of the situation.

If a remedial action is taken to manage a conflict of

interest, it should be recorded in the minutes. In certain

circumstances, a directors’ interests may be conflicted so

regularly or to such an extent that it is not practical for

them to continue in their role and it will be in the best

interests of the organisation that they resign.

It is a good idea to set out in a policy how conflicts of

interest will be managed. This policy should provide

guidance on when disclosures are expected, how they

are to be made and how failures to identify conflicts

will be responded to. It should also reflect any relevant

requirements in the organisation’s governing documents

and any laws that apply to it.

Importantly, a conflicts of interest policy should emphasise

the importance of creating a culture of disclosure. If in

doubt about whether something could be a conflict of

interest, it is always best to err on the side of caution

and to disclose it. This can also assist in promoting

accountability, especially if there is visibility of the

disclosure by an organisation’s stakeholders.

Reporting and responding to misconduct

Even the best policies and procedures will not always

prevent wrongdoing within organisations. Where this

occurs, it is important that there are systems in place to

investigate reports of wrongdoing and to take action to

address any misconduct.

The board plays an important role in this, particularly

in driving a culture of reporting and not turning a ‘blind

eye.’ Bad news should travel quickly and easily through

the appropriate parts of organisation so that it can be

responded to at the earliest opportunity. Boards should

encourage reporting of wrongdoing and satisfy themselves

that the organisation has appropriate processes in place

to detect and address it. It may be appropriate for certain

types of information about wrongdoing to be brought

to the attention of the board so that they can provide

appropriate oversight of the organisation’s investigation

and response.

One way boards can approach this issue is through

regularly reviewing information about the organisation’s

performance against the standards of behaviour it seeks to

meet, whether those standards are set by the organisation

(such as through its code of conduct) or by the law

(such as through regulation) or another source (such as

accreditation standards).



use to assess their conduct performance:

Figure 11: Examples of conduct performance measures


Conduct

Instances of misconduct

Legal and regulatory breaches and outcomes

Complaints from stakeholders

Outcomes of stakeholder complaints

Breaches of policy or service standards

Other aspects of performance measurement are discussed

in greater detail in Principle 6: Performance.

Protecting whistleblowers

Boards should also be satisfied that the people who

report wrongdoing are protected from any retribution.

These people are often referred to as ‘whistleblowers’.

Reports of wrongdoing may come from a range of sources

including current and former staff, contractors, volunteers,

clients and suppliers. These people are an important line

of defence against wrongdoing and providing them with

adequate protection against retribution can encourage

them to come forward with valuable information.

!There are laws that provide protection to whistleblowers where they raise issues of wrongdoing in certain circumstances. It is important to know and understand how these laws apply and to comply with them.

It is a good idea to establish a whistleblower policy that

sets out:

• Who can make a disclosure (which should ideally include

as broad a range of people as reasonably practical);

• How they can make a disclosure (including to whom, by

what method and whether they can do so anonymously);

• The matters about which they can make a disclosure;

• The protections they will receive (including any

protections under the law);

• How their disclosure will be investigated;

• How the organisation will communicate with them about

the investigation; and

• The consequences for people who take retribution

against whistleblowers.


"Whistleblowers are an important line of defence against wrongdoing and providing them with adequate protection against retribution can encourage them to come forward with valuable information.”



ARE THE BEHAVIOURAL EXPECTATIONS OF THE BOARD CLEARLY ARTICULATED?

WHAT ARE THE CONSEQUENCES FOR FAILING TO MEET BEHAVIOURAL EXPECTATIONS?

HOW EFFECTIVELY ARE CONFLICTS OF INTEREST MANAGED BY THE BOARD?

HOW DOES THE BOARD RESPOND TO BAD NEWS?

WHAT PROCESSES ARE IN PLACE TO PROTECT WHISTLEBLOWERS?


HelpfulCare

The board of HelpfulCare have authorised a code of conduct which applies to all staff, volunteers and directors involved with the organisation. The code sets out clear expectations of behaviour for these people and includes detail on how the organisation will respond to instances of misconduct.

All staff and volunteers at HelpfulCare are taken through relevant policies, including the code of conduct, as part of their induction. The board has also set a goal for management to deliver ongoing and regular training to staff and volunteers on key policies.

The board has a detailed policy on the management of conflicts of interest. All directors are required to record

relevant interests in a register as soon as they become aware of the conflict. The minutes always record any interests relevant to decision-making and the remedial action taken to address them.

HelpfulCare employ an independent third party to provide a confidential service through which staff and volunteers can report misconduct. Aggregate information about reports is provided to the board and any report concerning serious misconduct is provided to the board in full. The board has also established a whistleblower protection framework to protect the people who report wrongdoing.

The Friendlies

The Friendlies’ have a behavioural code called ‘The Friendly Way’ which sets out the minimum behavioural expectations for members including positive behaviours. The code also requires that members comply with other organisational policies.

All members of the Friendlies are required to follow the code. The governing documents of the Friendlies set out a process that can be used in instances of misconduct (not complying with the code is a form of misconduct).

At the beginning of board meetings, the chair invites members to disclose any conflicts of interest relevant to items on the agenda. The chair reminds directors that it

is a legal requirement to declare any personal interest. The board requires directors leave the room for any issue in which they have a conflict and that is noted in the minutes. They choose to be ‘better safe than sorry.’

The board has established a complaints policy which includes a procedure for responding to instances of misconduct. It makes sure all new members get a copy of the policy (and ‘The Friendly Way’) when they first become members, or when changes are made.

CASE STUDIES


CulturePRINCIPLE 10

The board models and works to instil a culture that supports the organisation’s purpose and strategy

10.1 The board defines and models a desired culture that aligns to the purpose and strategy

10.2 The board oversees a strategy to develop and maintain the desired culture

10.3 The board oversees mechanisms to monitor and evaluate organisational culture

10.4 The organisation’s values are clear, periodically reviewed and communicated to stakeholders

10.5 The board oversees a framework for the reward and recognition of workers



A strong culture is an invaluable asset to an organisation and

can contribute significantly to an organisation’s ability to

achieve its purpose. However, a poor culture can undermine

an organisation’s performance. The board plays an important

role in shaping an organisation’s culture, including through

leading by example.

What is culture

Culture represents the shared values, assumptions and

beliefs that shape the behaviour of the people involved in

an organisation. It is often described as the way people act

when nobody is looking. Culture can seem like a nebulous

concept, but while it may be difficult to measure or define,

it is a powerful influence on the people involved in an

organisation and their actions.

Good cultures are aligned to an organisation’s purpose and

support the achievement of its goals. For example, if your

purpose is to educate primary school children, the ability to

do this will be enhanced by a culture that prioritises the best

interests of the child and places emphasis on high standards

in teaching and child welfare.

Conversely, poor cultures can adversely impact an

organisation such as through its impact on staff morale,

absenteeism and the organisation’s ability to attract and

retain volunteers. Culture is also a significant factor in the

perception of an organisation by its funders, donors and the

community. In some circumstances, poor culture can

even result in misconduct.

It is also important to recognise that there may be multiple

cultures within an organisation. Different attitudes and

practices may emerge, and be actively cultivated within

particular teams, for example.

Monitoring culture

There is no single metric that can be used to evaluate the

culture of an organisation. Instead, boards must consider a

range of data sources to build a picture of culture through

combining both quantitative and qualitative information.

Measuring culture does not necessarily have to involve

the development and measurement of new performance

indicators specific to culture. Most organisations already

have access to a range of data that can be used to build a

picture of their culture.

“And now here is my secret, a very simple secret: it is only with the heart that one can see rightly; what is essential is invisible to the eye.”Antoine de Saint-Exupéry, The Little Prince

According to the AICD’s 2018 NFP Governance Study the

top five ways that NFPs measure culture are:

Figure 12: Top five ways of measuring culture

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(Source: AICD 2018 NFP Governance and Performance Study)

There are also other ways through which the board can

develop a sense of what the organisation’s culture is. For

example, the board might review the decisions and actions

of management to determine whether they are consistent

with the organisation’s desired culture. Many boards also

engage directly with clients, staff and volunteers to build a

picture of culture based on personal interactions. However,

care should be taken to keep the CEO informed about any

such activities.

The board’s role in culture

The board and its directors play a critical role in shaping

an organisation’s culture. Because culture can significantly

influence an organisation’s ability to achieve its purpose,

it is important that boards form a view on what kind of

culture will best support the achievement of their purpose

and take steps to develop or maintain it.

“The fish rots from the head.”Ancient Chinese proverb

45% 41% 40% 35% 33%


There are several different ways that boards can engage

with and practically influence an organisation’s culture.

For example, the selection of a CEO can have an enormous

impact on culture. Setting out a code of conduct for an

organisation can also influence the organisation’s culture,

as can establishing remuneration structures that incentivise

desired behaviours.

Every action of the board has potential to influence the

organisation’s culture in some way. For example, if a board

approves a budget which makes generous provision for

learning and development and requires reporting on how

much time staff spend undertaking training, over time this is

likely to contribute to creating a culture that values ongoing

education. Although such decisions might not be considered

through a cultural lens, they have the potential to influence

an organisation’s culture in small but powerful ways.

It is not only the board’s decisions that have the potential

to influence culture, but also its behaviours and attitudes.

How board members interact with one another, the

questions that they ask of management and the way they

conduct their meetings can all influence culture. In this

way, the culture of the board itself ripples through the

organisation. This is called setting the ‘tone from the top’.

Managing culture should therefore involve ongoing

reflection by directors about how their decisions and

behaviour shape their organisation’s culture. The cultural

impact of board decision-making should be a consideration

in decision-making. Boards should also consider how their

organisation’s culture might impact the certainty with which

the intended outcomes of their decisions will be achieved –

considering culture from a risk management perspective.

A simple way to keep this fresh in the minds of directors

is to make sure that culture is a regular agenda item for

board meetings.

Organisational values

One of the practical ways that a board can influence

culture is through defining organisational values. Values

are an expression of the organisation’s identity and are

intended to guide the behaviours and decisions of the

people involved with the organisation.

For example, if an organisation has the value of ‘excellence

in client service’, that may mean that they do not provide

services unless they are confident they meet a certain

standard, or that they prioritise rectifying service issues

when they occur over other issues.

For values to be effective they need to provide clear guidance

about what an organisation considers to be good. At times,

holding true to an organisation’s values can be challenging,

however, it is important that boards are prepared to make

difficult decisions to stay true to their values.

Boards must approve the organisation’s values and also work

within them. They should be guided by the organisation’s

values in their own decision-making and should also

challenge decisions of management when they are not in line

with the organisation’s values. Values are not meaningful

unless they are observed and there are consequences for

failing to observe them.

Culture and incentives

An important influence on an organisation’s culture is

the way staff and volunteers are incentivised to behave.

These incentives may be material (such as through pay

rises, bonuses or gifts) or non-material (such as increased

seniority, certificates of appreciation or public recognition).

The board should oversee a reward and recognition

framework that aligns incentives to the organisation’s

purpose. It is important that incentives are aligned to the

organisation’s purpose so that the people involved in the

organisation are working towards the same goals.

The way behaviours are incentivised or discouraged sends

an important message about what the organisation values

are and what it is trying to achieve. It is also important that

these incentives are realistic and achievable. For example,

if an employee is incentivised to do their job too quickly,

this may encourage them to rush or cut corners, and may

adversely impact the organisation’s purpose or even result

in misconduct.

Not all incentives are rewards. Some incentives are

negative, such as the possibility of a penalty for failing

to meet defined expectations. It is important that there

are negative incentives to discourage behaviours that are

inconsistent with a desired culture or stated expectations

of conduct.

Boards should be prepared to make difficult decisions to

enforce culturally appropriate behaviours and empower

management to do the same. In certain circumstances, such

as where the behaviours are extreme or repeated, it may

be necessary to terminate a person’s connection with the

organisation to protect the culture.



WHAT SORT OF CULTURE WILL BEST SUPPORT THE ORGANISATION TO ACHIEVE ITS OBJECTIVES?

WHAT IS THE CULTURE OF THE ORGANISATION AND HOW IS THIS DISCERNED?

HOW OFTEN DOES THE BOARD DISCUSS CULTURE?

DO THE BEHAVIOUR OF STAFF AND VOLUNTEERS ALIGN TO THE ORGANISATION’S VALUES?

HOW DOES THE BOARD ALIGN ITS DECISION-MAKING TO ITS VALUES?


HelpfulCare

HelpfulCare has established a policy document titled ‘Being HelpfulCare’ that articulates their desired culture alongside their strtegic statements.

The ‘Being HelpfulCare’ policy sets out the organisation’s values and the cultural behaviours that staff are expected to exhibit. Anyone can access the policy on HelpfulCare’s website.

The board has directed management to act within the limits of this policy and to find ways to bring the policy to life. As a result, cultural fit is assessed in the recruitment process and positive examples are celebrated through internal communications. The board set the principles and practices for reward and recognition of employees to promote alignment with culture.

The board regularly considers culture as part of their formal decision-making process. The board also requires that culture be considered in the context of recruitment and the executive have authority to manage staff who exhibit behaviours that are inconsistent with the cultural norms.

Measuring culture is a critical focus for HelpfulCare. The board has instructed management to undertake annual staff engagement and client perception surveys. The board also reviews performance measures such as staff turnover and work health & safety reports, and a selection of client feedback is presented for board review at each meeting.

The Friendlies

The Friendlies’ behavioural code called ‘The Friendly Way’ also sets out what their culture should be. The governing documents require the board to behave in a way that is consistent with the code and to promote it to members.

To assess how well the organisation is meeting its cultural goals, the board conducts a survey of members every two years. In the survey they ask how well the organisation is living up to ‘The Friendly Way’ and what steps the organisation could take to continue to improve.

‘The Friendly Way’ also sets out the organisation’s core values. In assessing new projects, the board is required to evaluate their alignment to the organisation’s values.

The board has required that demonstrating the organisation’s values and adhering to ‘The Friendly Way’ are part of the employment contract of the coordinator. The board also work to identify members who have been exemplars of the values and reward them through public recognition involving either commemorative awards or letters of appreciation from the president.

CASE STUDIES


Glossary

Agenda A document that sets out what business will be considered a meeting

Australian Charities and Not-for-prof-its Commission (ACNC)

The national independent regulator of charities

ACNC Governance Standards Five standards of governance that apply to registered charities

Annual report A report about an organisation’s activities, governance and performance

Annual general meeting (AGM) An annual meeting of an organisation’s members

Board The people responsible for governing and controlling an organisation

Board committee A group of people authorised by the board to assist with its work

Chair A person appointed to manage the business of the board

Charities Act 2013 The law that sets out the definition of ‘charitable purpose’

Charity An NFP that meets the legal definition of charity

Chief executive officer (CEO) The most senior member of an organisation’s staff

Committee members People appointed to a committee of the board

Company Limited by Guarantee A type of entity incorporated under the Corporations Act

Company secretary A person appointed to facilitate corporate governance processes

Conflict of interest When a person’s personal interests conflict with their duties

Corporations Act 2001 The law relating to corporations

Culture Shared values, assumptions and beliefs that shape the behaviour of the people involved in an organiastion

Director The members of an organisation’s board

Directors’ duties The legal duties of directors to their organisation

Financial statements Financial reports prepared for external audiences

Incorporated Association A type of entity incorporated under state or territory legislation

Indigenous Corporation A type of entity incorporated under the Corporations (Aboriginal and Torres Strait Islander) Act 2006

Governance The systems and process that direct and control an organisation

Governing documents The documents that set out how an organisation is to be run such as its constitution


Key performance indicator (KPI) The measures that an organisation uses to evaluate its success

Management An organisation’s staff, particularly its senior staff

Management accounts Financial reports prepared for internal audiences

Misconduct Behaviours that violate policies or law

Minutes Documents that record the activties and decisions of a meeting

Mission Statements that express what an organisation does to achieve its purpose

Non-executive director A director who is not a member of management

Not-for-profit (NFP) An organisation that does not operate for private benefit

Principles Statements that express what an organisation does to achieve this purpose

Purpose The reason an organisation exists

Registered charity A charity registered with the ACNC

Reserves Unrestricted funds available to spend at the organisations discretion

Risk The effect of uncertainty on objectives

Solvency An organisation’s ability to pay its debts as and when they are due

Special general meeting (SGM) An ad hoc meeting of an organisation’s members

Stakeholders People involved with the organisation (such as clients and staff)

Strategy The way an organisation defines its goals and aligns its activities and resources with them

Tenure The period of time that a director is appointed for

Terms of reference A document that governs the operation of a committee

Quorum The number of directors that must be present for a meeting to be valid

Values Statements that express what an organisation considers to be good

Vision Statements that express what an organisation aims to achieve


Acknowledgements

The NFP Governance Principles have been developed

through extensive consultation with directors and other

leaders in the not-for-profit sector. It also reflects the

feedback of the AICD’s NFP Chairs’ Forum, as well as its

policy committees and division councils.

In developing the NFP Governance Principles, the AICD

benefited enormously from the guidance and insight of a

steering committee comprising Murray Baird FAICD, Mark

Butcher FAICD, Phil Butler GAICD, Nadine Clode, Bruce

Cowley FAICD and Ken Dean FAICD, that met throughout

2018.

The AICD also recognises the contributions of Sue

Woodward and Nadine Clode of JusticeConnect who

provided formal external review of this document.

This document develops the 2013 version titled Good

governance principles and guidance for not-for-profit

organisations, and we acknowledge the contribution of

its original authors Dr Mark Blair GAICD and David

Shortland MAICD.

About the author

Lucas Ryan GAICD was a Senior Policy Adviser at the

Australian Institute of Company Directors. He drove the

AICD’s advocacy agenda in the not-for-profit sector, as

well as on innovation and technology. Between 2015

and 2017 he delivered the not-for-profit component

of the AICD’s ‘Essential Director Update’ and has been

a contributing author to the annual Not-for-profit

Governance and Performance Study.

Prior to working at the AICD, he was a foundation staff

member of the Australian Charities and Not-for-profits

Commission, establishing the governance education and

stakeholder engagement programs for the newly-formed

regulator. He is a graduate of the Company Directors Course

and has had experience on not-for-profit and

government boards.

About the external reviewers

Sue Woodward is the Head of Not-for-profit Law, a program

of JusticeConnect. Before that, she worked as a corporate

lawyer and academic at the University of Melbourne. Her

extensive experience in the not-for-profit sector includes

several years as a member of the senior leadership team at

the Australian Charities and Not-for-profits Commission with

responsibility for policy, education and red tape reduction.

She holds a number of non-executive director positions on

not-for-profit boards.

Nadine Clode is a Manager at Not-for-profit Law and has had

broad experience as a senior official in both state and federal

governments. She is a lawyer and educator with experience

working with not-for-profits over a number of years, and has

previously lectured in law at Federation University Australia.

Nadine was also a member of the steering committee for the

review of the NFP Governance Principles.


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ADDITIONAL RESOURCES

• Online versions of the Principles are available at companydirectors.com.au/nfpprinciples

along with a suite of relevant tools and content to assist users

• Further NFP resources including director tools are available here:

companydirectors.com.au/resources/not-for-profit-resources

http://aicd.companydirectors.com.au/nfpprinciples
